Lawmakers Should Protect Services that Lift Low-Income Families with Children out of Poverty
By David Gray
The number of Louisiana children with unemployed parents, receiving nutrition assistance and living in poverty has risen dramatically since the national recession began in December 2007, according to a new report by the Urban Institute and Focus First. The report should serve as a guide for Louisiana policymakers, who have an opportunity to make the state’s tax code less regressive when they undertake reform efforts next year.
Nearly one in 10 Louisiana children (28.8 percent) lived in poverty in 2011 – the fourth highest rate in the nation. Between 2007 and 2012, the number of children with unemployed parents increased by 45 percent, while the number of children with long-term unemployed parents (those seeking work for at least six months) increased by 142 percent, according to the report, The Recession’s Ongoing Impact on Children, 2012: Indicators of Children’s Economic Well-Being.
The effects of childhood poverty can persist for a long time. Parents experiencing economic hardship can become distressed, leading to bad parenting decisions and child abuse. Many children living in poverty assume low self-images and fail to develop high aspirations for their futures. Poverty makes it likelier that a child will perform poorly in school, repeat grades and eventually drop out before completing a degree, all of which affect future earnings.
Poverty can also lead to poorer health outcomes for children. According to the United Health Foundation, “children in poverty are roughly three times more likely to have unmet health needs than other children.” Poor children have higher rates of chronic disease, shorter life expectancies, less access to quality health-care, limited availability of healthy food and limited access to educational opportunities. As children grow into adulthood, they engage in more risky and unhealthy behaviors that put their lives at risk and increase health-care costs.
The current structure of Louisiana’s tax code places a heavy burden on the state’s low-income families – especially those with children. The average income of the state’s richest 20 percent of households is 8.8 times greater than incomes in the poorest 20 percent of households. Yet, those in the bottom 20 percent of Louisiana households pay 10 percent of their income in state and local taxes, while those at the top pay less than 6 percent of their income.
In addition, Louisiana’s income tax exemptions disproportionately benefit the wealthy. In fiscal year 2011, around 40 percent of all individual tax credits went to the richest 3,310 taxpayers. These individuals, whose adjusted incomes exceeded $1 million, received an average credit amount of $51,000. Taxpayers with adjusted annual incomes under $30,000 (the majority of taxpayers) received only 22 percent of credits, for an average credit amount of around $100.
The state’s regressive tax structure makes it difficult for parents working low-wage jobs to provide the bare necessities for their children. Because tax exemptions result in a direct loss of state tax revenues, the credits claimed by wealthy Louisianans undermine the state’s ability to help these families by funding essential services such as education and health-care.
Louisiana lawmakers could use tax reform as an opportunity to improve the economic well-being of low-income families with children. One common-sense way to get more children out of poverty is by increasing the value of the state Earned Income Tax Credit. Lawmakers could also use tax reform as an opportunity to make Louisiana’s overall tax code less regressive and fairer by closing tax loopholes that primarily benefit the wealthy and reducing taxes that burden those with less. Furthermore, tax reform should raise revenue so Louisiana can invest in services that help insure a more stable economic future for children, like education and healthcare.