Gov. Jeff Landry’s plan to enact steep income tax cuts for corporations and individuals relies on expanding the sales tax base to include everything from haircuts and lobbying services and eliminating ineffective tax breaks. These proposals have predictably led to pushback from special interest groups who benefit from the current status quo. LaPolitics’ Jeremy Alford and David Jacobs report on potential landmines for the governor’s plan and an alternative view that doesn’t rely so heavily on regressive sales taxes:
On the other side of the political spectrum from LABI and NFIB sits Invest in Louisiana, which argues that Louisiana’s tax system already relies too heavily on sales taxes and doesn’t want to see the state go further in that direction. Louisiana households in the poorest fifth pay 13.1% of their income in state and local taxes, while those in the highest-earning 1 percent pay 6.5%, Invest in Louisiana Executive Director Jan Moller said at a recent committee hearing. “As we think about fairness, any reforms to our tax structure should look to make this equation more balanced,” he said. “
Programming note: Invest in Louisiana is hosting a webinar today, Wednesday, Oct. 16 at 12 p.m where we’ll unpack Gov. Jeff Landry’s tax overhaul plan, discuss how it would affect Louisiana citizens and the state budget, and take questions. Click here to register.
Louisiana doesn’t raise enough money for infrastructure
Louisiana’s transportation department needs to increase its annual budget by $1.2 billion in order to chip away at a $19 billion backlog of infrastructure repairs and tackle much-needed megaprojects, according to an analysis by the Boston Consulting Group. The management consulting firm was hired by the Legislature to review the Department of Transportation and Development’s internal operations, including funding streams. The Times-Picayune | Baton Rouge Advocate’s Alyse Pfeil reports:
“State revenue sources that are dedicated to DOTD are insufficient, have not kept pace with cost growth, are not sufficiently diversified, and often lack flexibility,” the report says. About half of the department’s funds come from the federal government and about half are from the state, a large portion of that generated by the state gas tax. But the gas tax has been stagnant for 34 years, and its value has been diminished over the decades by inflation, better fuel efficiency and the introduction of electric vehicles.
Pfeil lays out the the private firm’s recommendations for DOTD:
To generate more revenue, it suggests several possible sources directly related to road use: increases in the state’s gas tax, motor vehicle sales taxes or electric vehicle registration fees; high-occupancy toll lanes; or new “road usage fees.” Revenue not related to road use could come from ride-share or retail delivery fees, casino or oil extraction fees, a tax on hotels or directing part of the state sales tax toward transportation.
The many drawbacks of Trump’s tariffs
It was difficult to parse through many of Donald Trump’s meandering statements during Tuesday’s forum at the Economic Club of Chicago, but the former president did make it clear that he intends to impose massive new tariffs on importers. Economists agree that the tariffs Trump is proposing, which would be paid by U.S. importers, not foreign countries, would lead to higher prices and interest rates for American consumers. The Washington Post’s Jeff Stein and David J. Lynch explain how tarriffs would wreak havoc on the U.S and world economy:
The consequences would be far-reaching: Americans would be hit by higher prices for grocery staples from abroad, such as fruit, vegetables and coffee. Domestic firms dependent on imports would need to either figure out new supply chains or raise costs for consumers. U.S. manufacturers would almost certainly see sharp declines in orders from abroad as foreign nations impose retaliatory tariffs. “We are talking about a plan of historic significance: It would be enormous, and the blowback would be even more enormous,” said Douglas A. Irwin, an economist at Dartmouth College who authored a 2017 book on the history of U.S. trade policy.
Grab your calculators. We’re going to jail
Many states’ criminal legal systems, including Louisiana, are financed in large part by fines and fees rather than state funds. This means that people who run afoul of the law – even for minor infractions – often end up saddled with exorbitant costs that can quickly add up and have a crushing effect on those least able to afford them. The New York Times’ Kirk Semple and Jonah M. Kessel created a video documenting a fictional character’s expensive trip through the American criminal justice system:
In the video above, we introduce viewers to Mike. He’s not a real person. He’s an invention, a generic character of our creation, whose grueling trip through the American criminal justice system is based on facts and real-world experiences. Mike is our guide to a hidden form of punishment: criminal justice fees. These are levied against people at every turn in their path through the system. They can be big — like the cost of posting bail — or small, like fees to see a doctor in prison. They accumulate quickly and can turn into crushing debt. This hypothetical narrative allowed us to show the myriad ways that fees are extracted from people in the justice system.
Number of the Day
$2,600 – Increase in annual costs for a typical family under former President Donald Trump’s proposed tariffs. (Soure: Peterson Institute for International Economics)