UPDATE: The legislature did not make any changes to the state’s EITC in the special session.
There may be only one tax incentive that’s hovering somewhere between being doubled or being eliminated entirely in the current Louisiana special legislative session.
The Earned Income Tax Credit (“EITC”) was first implemented under Republican President Gerald Ford in 1975 as a federal tax incentive to reduce poverty by encouraging work. It was expanded under Republican President Ronald Reagan in 1986. Since then, more than half the states have responded with their own state-level incentives to further incentivize work among low-income families, including Louisiana. It should be noted, though, that Louisiana has the lowest state credit in the nation. The Louisiana Budget Project recently updated its EITC report which provides a good, detailed examination of the incentive and its implications here (full disclosure: I am the board chair of LBP). Read the report here.
Now, in light of the state’s fiscal crisis, a Republican legislator from Prairieville wants to end Louisiana’s credit.
State Rep. Tony Bacala said on Facebook that the $47 million saved from eliminating the EITC would help offset potential cuts to TOPS, a program whose recent funding threats spurred mass hysteria. Instead of helping working families make ends meet, his proposed policy change would save money to support a program that, according to a recent report, serves mostly white, affluent families in Louisiana. Incidentally, New Orleans education writer and scholar Andre Perry summed up my feelings well in a recent column for The Washington Monthly:
The mere thought of curtailing access to college by limiting or eliminating TOPS gave middle class folk in Louisiana a hint of what low-income families experience in education, health care, housing and policing.
But back to the topic at hand. According to the Louisiana Budget Project, the EITC is America’s best tool to reduce childhood poverty and has been shown to transition working families off of government assistance. From their extensive analysis:
On the other side of the aisle (and this issue), Speaker Pro Tem Walt Leger III has proposed legislation to double the state credit. Given our usual political assumptions, one of Leger’s arguments in favor of a higher EITC sounds strangely out of place coming from a Democrat from New Orleans:
“This allows about 30-percent of the state of Louisiana to keep more of their earned money. … I see this bill as a response to consistent criticism that I hear – in this building and in the community at large – about people ‘getting something for nothing.’ This program is one that rewards people for working.”
These comments were made in the 2015 regular session when Rep. Leger first championed the increase for working families. The Times-Picayune editorial board called doubling the state EITC “a conservative approach to helping families” in a May 2015 editorial. “The credit helps not only families, but the businesses where they spend their earnings,” the board said, with a strong nod to middle-out economics. And yes, this is the same editorial board that endorsed David Vitter for Governor in October and again in November last year.
The editorial board rounded out the argument in favor of a higher EITC quite well (emphasis mine), removing any need for me to find a clever way to end this article: “Giving them a little extra financial cushion is the right thing to do. It is the compassionate thing to do. And it is the smart thing to do.”