The many benefits of working family tax credits

Tax credits for working people and families, such as the Earned Income Tax Credit and Child Tax Credit, have a proven track record of lifting people out of poverty and putting children on the path to a brighter future. The Institute on Taxation and Economic Policy’s Neva Butkus explains how state-level EITCs supports families and workers by offsetting regressive state tax systems: 

Unlike federal taxes, state and local taxes as a whole are regressive, requiring low- and moderate-income families to pay a greater share of their incomes than wealthier taxpayers. The poorest 20 percent of Americans pay 11.4 percent of their incomes in state and local taxes. By contrast, middle-income taxpayers pay 10.5 percent, and the wealthiest 1 percent of taxpayers pay just 7.2 percent.[7] Regressive sales and property taxes (which all working families pay whether renting or owning property) create the high state and local tax rates faced by the poorest households. 

Butkus explains why states should create their own Child Tax Credits:

The lapse of 2021’s federal Child Tax Credit enhancements has inspired a string of state actions and should continue to do so going forward. … The advantage of implementing a credit separate from the federal CTC is that states can avoid the shortcomings of the federal credit (particularly the earnings requirement and lack of full refundability) that keep many lower-income families from receiving the full benefit. Instead, states can use the flexibility they have to determine the scope and scale of their credits without these restrictions.

Rep. Matthew Willard’s House Bills 133 and 337, which would increase Louisiana’s EITC and create a state-level CTC, respectively, are being heard in the House Ways and Means Committee on Monday. The latest episode of Invest’s Didja Know? Podcast breaks down the many benefits of working family tax credits. Listen here.

Hospitals anxious about potential Medicaid cuts  

“Provider” fees charged by hospitals, nursing homes and other health care providers that serve patients on Medicaid are a critical tool for states to raise money for their share of the health insurance program. But the fees are in the crosshairs of House Republicans, who are looking for ways to cut $880 billion from the Medicaid program over the next decade to partially offset the cost of proposed tax cuts for the wealthy and large profitable corporations. The Times-Picayune | Baton Rouge Advocate’s Mark Ballard explains: 

The federal government pays most of the costs of Medicaid, with the states kicking in part. When states use provider fees to increase how much they pay for Medicaid, that means the federal share of funding increases. The state then pays the providers who are taxed to administer Medicaid services. Initially approved by Congress in 1991, provider taxes have become a conservative cause célèbre.

Nixing provider fees would force the state to look for other ways to raise revenue – or else make cuts to the program that serves about 1 in 3 Louisianans: 

If the taxes are eliminated, state government would have to pick up the tab — and, since lawmakers are already grappling with a tight budget, that could lead to the loss of Medicaid benefits for many. … “Cutting provider taxes is cutting Medicaid,” said Ryan Cross, vice president of government affairs at Franciscan Missionaries of Our Lady Health System.”

The Times-Picayune | Baton Rouge Advocate editorial board urges Louisiana’s congressional delegation to use caution when considering cuts to Medicaid. 

We urge our leaders, as they undertake this important debate, to consider modernizing and investing in Medicaid to make it more efficient without cutting benefits. We also hope they will weigh whether the political benefit of being seen as budget-cutters outstrips the potential that fellow Louisianans, through no fault of their own, will lose this important service. 

Shortage of resources to help foster children

Louisiana is struggling to handle the record-high numbers of children entering foster care, with some parishes having no available homes for kids to live in. The Times-Picayune | Baton Rouge Advocate’s Claire Grunewald explains why Louisiana experiences a high number of foster children: 

Children enter foster care after having to leave their families due mainly to neglect or abuse. Allegations of neglect are often connected with poverty, and Louisiana hovers at the top of the list of states with the highest rates. In 2024, Louisiana officials received more than 52,000 abuse and neglect reports and conducted more than 21,500 investigations.

Federal cuts have exacerbated the shortage of resources aimed at helping children in foster care: 

[Court Appointed Special Advocates]  volunteers are appointed by judges to help children in the foster system. … The U.S. Department of Justice issued hundreds of terminations of federal grant awards in late April, and the national CASA was one of the recipients. Louisiana CASA Executive Director Amanda Moody says while the cut is “not detrimental to our survival” given diversified funding efforts, the $120,000 cut from the state impacted special projects — including one for recruitment.  “That really does hurt,” she said.

More offshore oil revenue 

Louisiana would reap more money from offshore oil revenue under a reconciliation proposal that’s being hashed out in Congress. The Times-Picayune | Baton Rouge Advocate’s Mark Ballard reports: 

Exactly how much more funds Louisiana receives if the reconciliation bill becomes law can’t be determined. The amounts are set by a complex formula that considers the number of platforms in the Gulf. But applying the proposed formula to historical numbers, a reasonable estimate could be $600 million to $800 million more over a 10-year period, legislative aides say. Louisiana’s 2024 cut was $163.5 million, which was split between state and parish governments. 

Number of the Day

$71 million – Amount of money that Louisiana’s Earned Income Tax Credit puts back into local economies. (Source: Invest in Louisiana)