Louisiana senators want more details on Gov. Jeff Landry’s administration’s plan to overhaul the state’s tax system before they commit to a November special session. Revenue Secretary Richard Nelson is calling for across-the-board income tax cuts for people and corporations and eliminating the corporate franchise tax, but has offered few details about how Louisiana would make up the resulting revenue loss. The Louisiana Illuminator’s Julie O’Donoghue reports:
“No matter when we address tax policy, it’s going to be helpful for members to have as much information as possible,” Senate President Cameron Henry, R-Metairie, said. The head of the Senate’s tax committee, Franklin Foil, R-Baton Rouge, told Nelson at the hearing last week that legislators will need more information in order for a November special session to be successful. “Are you going to come back with some specific things you would like to recommend to the governor to be in [special tax session] the call?” Foil asked Nelson. Nelson responded that he would finalize his proposal by the end of next week after talking more with the governor and legislators.
As O’Donoghue explains, doing nothing is not a viable option, as several “temporary” taxes are due to expire next year.
If the Legislature chose to do nothing, state residents would still see a tax cut next year as well as a state budget deficit of $587 million that would likely result in cuts to health care, higher education and K-12 school services. The financial shortfall would largely be driven by that scheduled 0.45% cut to the state sales rate, which would cost $455 million, and the elimination of a 2% sales tax on business utilities, which would cost $211 million.
As Invest in Louisiana’s Paul Braun explains in a new issue brief, a 3.5% flat tax that Nelson is proposing would cost the state more than $1.1 billion per year in lost revenue and disproportionately benefit the state’s richest residents.
How Trump could upend U.S. tax system
Former President Donald Trump has floated an idea in recent weeks to replace the nation’s income tax with a broad tax on imported goods. But tariffs, such as the ones Trump is proposing, cause companies to pass on additional import costs to consumers, which lead to price increases. The New York Times’ Andrew Duehren explains how the former president could upend the U.S. tax system:
Still, several of those economists do not view Mr. Trump’s proposals as the right way to reorient the country’s tax system, arguing that they could explode the deficit, spur trade fights and disproportionately burden lower-income Americans. That’s because those Americans, who have less money to spend, use a larger share of their overall income to buy goods that would probably get more expensive under Mr. Trump’s tariffs. “Whether he knows it or not, or intends it or not, it’s a shift from taxing income to taxing consumption in some fashion,” said Michael Graetz, a tax scholar at Columbia Law School, who has argued that the United States should adopt a consumption tax. He still takes issue with Mr. Trump’s proposals.
Duehren explains how Trump’s other tax proposals could lead to costly tax evasion:
Budget experts have puzzled over the exact consequences of Mr. Trump’s promises to not tax tips and overtime pay. But many worry that the policies would encourage millions of Americans to change how they are paid so they earn more in tax-free tips and overtime, a tax-dodging gold rush that could cost the government hundreds of billions.
How North Carolina tackled medical debt
North Carolina recently canceled $4 billion in medical debt for nearly 2 million residents. KFF’s Noam N. Levey and the Charlotte Observer’s Ames Alexander explain how Gov. Roy Cooper’s administration used an influx of federal dollars from the state’s recent expansion of Medicaid as leverage to get hospitals to go along with their plan, and how the move provides a roadmap for other states to do the same:
Instead of giving it away with no strings attached, they asked, what if they made hospitals protect patients from medical debt in exchange for the funds? If hospitals wouldn’t, the state would dock their money. … Many hospital systems in North Carolina stood to get nearly twice as much money by agreeing to participate in the debt relief plan, state figures show.
The Cooper administration had to overcome opposition from the state’s powerful health care association and its army of lobbyists:
Meanwhile the hospital association made plans to convene a meeting with health insurers and business leaders to discuss medical debt, an approach that threatened to slow the state effort to hold hospitals singularly accountable. The group met at Ruth’s Chris Steak House in Raleigh, a restaurant where a steak costs $60 and up. In a recent interview, [North Carolina Healthcare Association CEO Steve] Lawler said the hospital group was just trying to build consensus for a different strategy for tackling medical debt.
New Orleans received opposition from two major regional hospitals, Ochsner Health and LCMC Health, in its effort to erase medical debt. The Crescent City recently reached an agreement with Ochsner to eliminate $59 million in debt, but negotiations with LCMC Health remain ongoing.
Crucial effort to combat truancy
Louisiana’s post-pandemic truancy rates remain high, even as other states have seen decreases. But recent reporting highlighted creative strategies, such as offering extra recess or free dress days, that some school districts are using to address chronic absenteeism among their students. A Times-Picayune | Baton Rouge Advocate editorial praises these efforts and explains their far-reaching impact:
It should go without saying that excessive absences have a number of negative downstream effects, not just on the children, but on society as a whole. Kids who are frequently out of school get lower grades, have worse social and emotional health and are more likely to drop out. They also will struggle to find good employment and are more likely to end up the criminal justice system. … We applaud each of these efforts. Having more kids in schools — where they get instruction, social interaction and regular meals — is not just important to the child, and his or her family. It’s good for everyone.
Number of the Day
$1.7 billion – Amount of private-sector investments for clean-energy projects in Louisiana since the passage of the Inflation Reduction Act in August 2022. Tax credits included in the legislation were designed to drive private-sector investments in clean energy. (Source: Governing)