Louisiana ranks sixth among states with the largest income disparity between the rich and the poor, according to a report released Wednesday by a national policy group.
The Center on Budget and Policy Priorities, which examines policies affecting low- and moderate-income families and individuals, found that the average income of the richest 5 percent of households in Louisiana is 14.1 times larger than the income of the bottom 20 percent of households.
“The divide between the poorest and richest households in Louisiana is among the worst in the country,” said Elizabeth McNichol, who co-authored the report.
The report ranked Louisiana sixth in the greatest disparity between the top and bottom income households in the late 2000s. The gap was greater in New Mexico, Arizona, California, Georgia and New York.
Jan Moller, director of the Baton Rouge-based Louisiana Budget Project, said Louisiana’s tax code is tilted toward the wealthy.
The Louisiana Budget Project is an arm of the Center on Budget and Policy Priorities.
He said the state gives away hundreds of millions of dollars a year in tax breaks while relying heavily on sales tax revenue that penalizes the poor.
Moller suggested legislators could consider doubling the state earned income tax credit or increasing a child care tax credit during next year’s session.
Gov. Bobby Jindal already said the session will focus on the state’s tax code. Exactly what changes the governor will push is unclear.
“We hope this report serves as a wake up call to legislators and policy makers,” Moller said.
The earned income tax credit benefits low- and middle-income taxpayers who work. The child care tax credit helps parents with child care expenses.
Tim Barfield, executive counsel for the state Department of Revenue, declined to comment on the report.
Barfield’s communications director, Douglas Baker, said the governor’s package will focus on making the state’s tax code fairer, flatter and simpler for all citizens. “The best way to lift the poor out of poverty is a job, and that is our hope as we look toward the upcoming legislative session,” Baker said in a prepared statement.
Moller said he hopes the legislative debate will be undertaken with the state’s lower income households in mind.
He said increasing the earned income tax credit would help struggling households pay for car repairs, school clothes, rent and debt. The money would go back into the economy, he said.
Moller said the report took a snapshot of income after federal, but not state, taxes were removed. He said the income analyzed for the report takes into account federal benefits such as food stamps.
He said the governor needs to boost the income of people in the bottom class rather than lower tax rates for corporations that already do well.
Moller said he has not raised his ideas with the Governor’s Office. “Our point of view is certainly no secret,” he said.
McNichol said the gap between rich households and low- to middle-income households is growing nationwide.
The report blames the gap on stagnant or modest growth in wages for the nonwealthy and a decline in the real value of the minimum wage.
The Center on Budget and Policy Priorities said states can close the gap by:
- Raising the minimum wage.
- Undoing cuts to unemployment insurance benefits.
- Ending states’ heavy reliance on sales taxes and user fees.