Lawmakers clashed Thursday over a Louisiana tax credit for the working poor and whether it should be scrapped or expanded amid the state’s deep financial problems.
At issue in the Louisiana House Ways and Means Committee were competing bills about Louisiana’s Earned Income Tax Credit, aimed at working people with low to moderate incomes.
State Rep. Tony Bacala, R-Prairieville, is proposing to end the state tax credit to save Louisiana $47 million a year, to help offset a massive state budget gap.
He said that could save some higher education programs and health care services from deep cuts.
“I think it has some merit, except we’re in a budget crisis,” Bacala said of the tax break. He said the state has to make tough choices about what it can afford: “No matter what decision we make, it’s going to pinch people.”
But he ran into pushback from advocacy groups and lawmakers who say the tax credit helps the working poor afford basic life expenses.
Rep. Walt Leger, D-New Orleans, wants to double the credit, saying it could help offset the impact of a 1-cent sales tax hike sought by Gov. John Bel Edwards to help rebalance the state budget.
“If we’re struggling, then so are families in the state of Louisiana,” Leger said. “Programs like this help to prop them up in a difficult time.”
Louisiana faces a budget gap of $850 million to $900 million this year, which must be closed by June 30. Edwards has asked lawmakers gathered in a special session to raise taxes to help offset part of the shortfall.
On the books since 2007, the Earned Income Tax Credit piggybacks off a similar federal program, allowing families to receive a state tax credit that equals 3.5 percent of the federal credit. Twenty-nine percent of all tax filers in Louisiana claimed the credit last year, receiving an average $96.93, according to the Louisiana Budget Project, which advocates for poor and moderate-income families.
Bacala said only half of states offer similar programs, and he noted Louisiana gives money to people above their state tax liability.
“This is not an income tax return. This is an extra check,” he said.
Supporters of Leger’s bill to double the credit said the program allows working people to keep more money to pay their bills and spend in the economy. They said studies show children in families who receive the tax break perform better in school, making them more likely to become taxpaying citizens themselves.
“It is one of the very best tools available for fighting poverty,” said Jan Moller, director of the Louisiana Budget Project.
The House committee didn’t make a decision on either bill Thursday. Lawmakers on the panel will consider the whole package of tax proposals together after reviewing all the bills.