Tax cut triggers causing predictable anxiety

Tax cut triggers causing predictable anxiety

A tax-swap package that passed in the final hours of the 2021 legislative session included a “trigger” that requires automatic tax cuts if Louisiana meets certain revenue benchmarks. With a temporary influx of federal aid and better-than-expected tax revenue, the state has already hit two of those requirements.  Sen. Bret Allain, the architect of the 2021 package, has introduced a bill for the upcoming session designed to limit the potential revenue losses from the trigger. The Louisiana Illuminator’s Wesley Muller explains:

The Louisiana Budget Project’s Jan Moller said his organization opposed the triggers when lawmakers first unveiled them in 2021.  “It was exactly this scenario that we were worried about — a temporary fiscal boom leading to permanent tax cuts,” Moller said. Whether Allain’s new legislation would be effective in stemming revenue losses caused by the tax cut triggers remains to be seen. A fiscal impact statement for the bill is still pending.  “It’s a good idea on its face to cut back (or eliminate) the Quality Jobs program, which research has shown is ineffective and costs $180 million a year that could be better spent elsewhere,” Moller said. “The trigger is still (a) terrible policy, but revenue neutral is certainly better than an automatic permanent tax cut financed with temporary revenues.”

Reality check: The automatic tax cuts would come when the prospects of a future recession are increasing and as Louisiana faces a massive fiscal cliff in 2025 because of the expiration of a temporary $0.45 cent state sales tax, and as vehicle sales taxes are fully diverted from the state general fund. 


State preparing for electric vehicle growth
Most of the money to build and repair Louisiana’s roadways comes from gasoline taxes paid by drivers. But the tax has been stagnant since 1990, and has lost much of its value due to inflation, vehicles becoming more fuel efficient and the advent of electric cars. The Advocate’s Will Sentell reports on a new pilot program that will look for ways to blunt the revenue loss through road user fees on all vehicles:

(State Transportation Secretary Shawn) Wilson said the pilot project would initially consist of about 4,000 state-owned vehicles used in both urban and rural areas. “The idea is not to have just one vehicle that travels from point A to point B,” Wilson said. The fees would target all vehicles, not just electric, hybrid and other non-traditional cars and trucks. Newer model cars and trucks might have the technology needed to track miles traveled and other issues while an app or other device would be used for older models.

Reality check: While it’s important for electric vehicles to pay for their use of state roadways, the real source of Louisiana’s transportation woes is the Legislature’s refusal over the past three decades to raise the state’s gasoline tax.


Clawing back pandemic aid
Just as with cuts to Social Security and Medicare, congressional Republicans are pushing back on previous statements that they are considering reclaiming some American Rescue Plan Act funds as a condition of agreeing to let the country pay its debt obligation. While it appears that local ARPA funds will be spared from the debt ceiling hostage negotiations, Route Fifty’s Kery Murakami explains the chaos that would ensue if lawmakers clawed back pandemic aid. 

The prospect of Congress reclaiming part of ARPA’s $350 billion in Coronavirus State and Local Fiscal Recovery Funds has unsurprisingly raised the concerns of local officials. …. Local officials, including some from Republican areas of the country, said in interviews they opposed the idea. “I think that’d be a really bad idea,” Jason Bellows, the Republican supervisor of Lancaster County, Virginia, and president of the Virginia Association of Counties, said in an interview last weekend.  “We’re best suited to spend those dollars wisely and make the most proper investments in our communities because we know our community’s best,” he said at a gathering of the National Association of Counties in Washington. 


Americans are delaying medical care 
More Americans are delaying medical care as they deal with high prices from inflation and depleted savings accounts. In 2022, a record number of Americans put off medicare care and more than a quarter of people with employer-based coverage were underinsured because of high costs. The New York Times’ Reed Abelson explains how these delays will worsen medical conditions. 

“We are starting to see some individuals who are putting off some care, especially preventive care, due to the costs,” said Dr. Tochi Iroku-Malize, the president of the American Academy of Family Physicians and the chair of family medicine for Northwell Health in New York. Choosing between going to the doctor or paying for rent and food, “the health issue is no longer the priority,” she said.  The inability to afford medical tests and treatment, a perennial concern in the United States, began emerging as a much more striking issue last year. 

The affordability of medical care will only get worse as pandemic-era Medicaid coverage protections expire and states begin to review eligibility.


Number of the Day
$12.23 – The value of the federal minimum wage in 2022 if it had kept up with inflation since 1968. The minimum wage has not been raised since 2009, and remains stuck at $7.25 per hour (Source: Economic Policy Institute via LBP’s State of Working Louisiana report)