Many states, including Louisiana, passed irresponsible tax cuts in recent years while their coffers were flush with federal dollars and better-than-expected tax revenue from the post-pandemic economy. But now those states are struggling to navigate fiscal headwinds and deal with increased budget pressures. Wesley Tharpe and Tyler Godding of the Center on Budget and Policy Priorities explain:
These states are now reckoning with the impact of these tax cuts and facing additional pressures on revenue, including federal funding cuts in the harmful Republican megabill enacted in 2025 that shift health care and food assistance costs to states; private school voucher programs that are draining public education funds; a wave of broad property tax cuts; and increasing economic headwinds.
Not every state joined this race to the bottom. Some, like Colorado, increased revenue to make investments in education, infrastructure and other priorities such as universal school meals:
First, voters in 2022 approved — and in 2025 expanded — a ballot measure to limit various deductions available to high-income taxpayers to support access to universal school meals. In 2022, the measure reduced the cap on income deductions for households making over $300,000 from $30,000 for single filers and $60,000 for joint filers to $12,000 and $16,000 respectively, generating $100 million annually for school meals.
Maine launched a paid family and medical leave program:
In 2023, Maine enacted a 1 percent payroll tax increase that will generate $360 million a year in revenue to fund a 12-week paid family and medical leave program, scheduled to launch in 2026.[11] This would provide a needed benefit for Maine workers — only 28 percent of whom currently have access to paid leave — as well as compensation to 166,000 family caregivers currently providing an estimated $3 billion in unpaid care.
And Maryland is able to plug a massive budget shortfall:
These include higher tax rates for those earning over $500,000 and $1,000,000 and a phase down of itemized deductions for high-income earners. In addition, Maryland also instituted a 2 percent tax on capital gains for those making over $350,000. Together, these changes are estimated to increase general fund revenue by over $700 million each year, with 82 percent of the revenue coming from those earning more than $845,000.
The Louisiana Legislature’s decision to reduce income taxes will help contribute to budget shortfalls in upcoming years.
Data centers need community benefit agreements
The rush of data center construction across the country comes with environmental, financial and other risks for communities. Nicol Turner Lee and Darrell M. West of Brookings explain how community benefit agreements can provide transparency and protection for people living near these massive centers:
A community benefit agreement for data centers should include quantifiable data on the job opportunities, tax revenue, workforce training programs, health and well-being contributions, and other benefits of proposed facilities. Combined with metric tracking and rigorous evaluation programs, CBAs can mitigate community concerns and help community leaders and residents achieve a better understanding of how data centers function and affect local areas. They can also ensure that the process involves mutual respect among all parties.
Lee and West break down key features of these agreements:
Several key features stand out in these agreements, including transparency, affordability, and sustainability for communities. These manifest in firms making direct payments, creating community funds, and delineating tax revenues, and affect issues such as infrastructure improvements, construction and operating jobs, electric rates, water usage, noise levels, light pollution, workforce training, health and well-being services, digital access for the underserved, and public dashboards with key metrics.
‘Green energy’ giant is a false solution for small towns
The British energy giant Drax opened wood pellet mills in former lumber towns in Louisiana and Mississippi. The investment arrived in Urania, La., and Gloster, Miss., as the towns were struggling to recover from the exodus of industry in recent decades. Verite News’ Tristan Baurick explains how the plants came with plenty of pollution, major tax breaks, but few long-term benefits to communities:
Drax’s two mills in the state (Louisiana), which employ about 140 workers, have been exempted from paying about $75 million in property taxes via the state’s Industrial Tax Exemption Program, known as ITEP, Verite News and Grist found in a review of estimates from Louisiana Economic Development, a state agency. Aimed at attracting jobs and economic activity, the tax-exemption program shields large companies from taxes that would otherwise help support school districts, police departments, and other local government operations.
A demographic shift on college campuses
Black and Hispanic enrollment has declined at America’s most selective colleges and universities since a 2023 U.S. Supreme Court ruling that outlaws affirmative action in school admissions. But state flagship universities have seen a corresponding uptick in enrollment by underrepresented racial minorities. The New York Times’ Stephanie Saul reports on data gathered by the nonprofit group Class Action:
While the data covers only freshmen enrollment the first year after the Supreme Court decision went into effect, it bolsters the prediction by some education experts that the decision would create a chain of consequences. Highly qualified Black and Latino students, who might have been admitted to the Ivy League and other similar schools before the Supreme Court decision, enrolled in less-selective schools as a result of the decision, potentially leading to a “cascade” of less qualified minority students enrolling in even less selective institutions.
Number of the Day
12.8% – Increase in earnings for workers covered by a union contract compared to nonunionized workers. (Source: Economic Policy Institute)