The case against top-heavy tax cuts

The case against top-heavy tax cuts

Louisiana isn’t the only state that has experienced a surge in government revenue during the pandemic. Robust federal aid and a quick economic recovery have produced big budget surpluses in numerous states. As Aidan Davis and Neva Butkus report for the Institute on Taxation and Economic Policy, some states are proposing to invest the money in programs and policies that support low- to moderate-income families. But many others are pursuing policies that would widen economic disparities by cutting taxes on wealthy people and corporations. 

Merely a week into its legislative session, Mississippi house members rushed a bill to eliminate individual income taxes through a committee with minimal public input. They shrouded this tax cut in a bill that includes a popular increase in teacher pay and a hodgepodge of other tax changes such as a 1.5 percent sales tax increase. These changes would create a permanent revenue loss of more than $1.5 billion and raise taxes on the state’s poorest residents. Meanwhile, Republicans in Kentucky are bucking the Democratic governor’s wishes by working to lower the state’s flat income tax rate and replace the lost revenue with higher sales taxes—a huge hit to poor and moderate-income households. And Iowa’s governor and legislators have introduced a bill that would swap the state’s progressive income tax brackets for a 4 percent flat rate.

A scarcity of frontline workers
The U.S. economy added 467,000 jobs in January, defying experts who predicted a slowdown, as more people resumed looking for work after months or years on the sidelines. But many industries are still having trouble finding workers – especially those that require a lot of face-to-face interaction with the public. Stateline’s Tim Henderson reports that frontline workers – including police officers, nurses, school bus drivers and retail workers – are retiring in greater than usual numbers, partly because of the ongoing threat posed by Covid-19. 

Retirements account for a large chunk of the labor shortage, according to research by the St. Louis Federal Reserve Bank published in October. There were about 2.4 million unexpected retirements since the beginning of the pandemic, more than half of the 4.2 million people who left the workforce and hadn’t returned, the report found. As a policy matter, states and cities should think about requirements that would make public-facing jobs safer so older people feel comfortable returning to them, at least part time, said Monique Morrisey, an economist at the left-leaning Economic Policy Institute specializing in retirement security. A healthier generation of older workers has become a mainstay of the workforce in recent years.

Flood insurance hikes will hit low-income homeowners hard
The federal government overhauled its flood insurance program last year, revising its risk-rating system to more accurately reflect flood risks and to halt the practice of subsidizing newer, more expensive homes in flood-prone areas. But The Advocate’s Mike Smith reports that many Louisiana policyholders, including low- to moderate-income homeowners, could see their premiums quadruple over the next decade as a result of the changes. 

The rate increases would be phased in slowly over multiple years because program rules limit price hikes to 18% annually. Around a fifth of Louisiana policyholders deemed to have been paying too much are expected to see one-time decreases averaging about $960 under the ambitious remaking of the National Flood Insurance Program, known as Risk Rating 2.0. … The figures are only projections and subject to change, but they provide the most complete look so far of the impact Louisiana could see under the new system. The flood insurance program is of vital importance here: Louisianans have by far the highest participation rate in the program of any state. The state also accounts for a disproportionate share of claims.

The new climate plan
Louisiana recently became the first state in the Deep South to adopt a climate action plan, with the goal of reaching “net zero” in greenhouse gas emissions by 2050. A key plank of that platform is investing in the dubious practice of carbon capture and storage – capturing carbon generated in petrochemical production and pumping it underground. The Times-Picayune | Baton Rouge Advocate is on board with the concept:  

Edwards and the Biden administration, as well as the corporate boardrooms, are highly focused on sequestering carbon instead of emitting it into the atmosphere. A big part of our energy transition will be making that technology work here. We also have assets in hydrogen pipelines and a geology that could make industry better able to sequester carbon. A $4.5 billion “blue hydrogen” plant proposed in Ascension Parish is a part of the solution — not, as critics of the industry say, only a Band-Aid on the problem.

But the invaluable Bob Marshall offers a dissenting view: 

Large scale carbon capture hasn’t even been proven to work. Billions in taxpayer support for the few large projects have ended in failure. No one knows what effects pumping hazardous emissions into the ground will have on aquifers — many of which are already declining due to warming caused by those same emissions. Some carbon capture ideas include converting them to a fluid and then using that for fracking new oil and gas wells — basically producing more of the products that result in more emissions requiring more capture. 

Number of the Day
$745 – Average annual premium in Louisiana under the National Flood Insurance Program. Under a new risk-rating system, 70% of policyholders will get a rate increase of up to $120, with some seeing much steeper hikes. (Source: FEMA via The Advocate)