A national nonpartisan research group that focuses on reducing poverty is calling on Louisiana leaders to embrace tax policies that set out to reverse a growing income inequality among the state's residents.
Louisiana has one of the largest disparities between its poorest residents and the richest, according to the Washington, D.C.-based Center on Budget and Policy Priorities' analysis released this week. The report found only New York, California and Connecticut have a larger gap than Louisiana between average income for the state's wealthiest and low-income households.
"State policy choices can make matters worse or they can improve them," said Center on Budget and Policy Priorities fellow Liz McNichol, the report's author. "Reducing inequality should be a priority of decision makers."
The Louisiana Legislature is expected to next year mull tax proposals as it sets out to fix the state budget, which has been caught in a cycle of deficits in recent years.
"2017 in Louisiana represents, really, the best chance we've had in almost a generation to make some structural changes in our tax code to begin to address some of these things," said Jan Moller, director of the Louisiana Budget Project, which advocates on behalf of low and moderate income households and joined CBPP for the release of the report.
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A blue-ribbon panel created by the Legislature recently released a list of tax recommendations, which include compressing the state's income tax brackets and expanding the base through eliminating exemptions. It has also recommended lowering the state sales tax but expanding it to some services and removing exemptions.
McNichol said Louisiana's current system taxes poorer residents disproportionately because a larger share of their household income goes toward taxes.
"Unfortunately, state taxes generally make inequality worse," she said.
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Income inequality — reflected in the disparity between the average income of the wealthiest 5 percent of the population versus the poorest 20 percent — can lead to long-term issues that affect the economy that deepen cycles of poverty.
"When you have this kind of widening divide, it can reduce support for public programs," McNichol said. "We're wasting this big resource of the younger generation."
"It is a drag on economic growth," she said.
The Center's analysis of Census data found that the bottom 20 percent, based on yearly household income for a family of four, made on average $17,113 in Louisiana, compared to $270,985 for the top 5 percent.
McNichol said much of the growing disparity, which was also seen nationally, is linked to the loss of high-paying manufacturing jobs.
"The fact that the lion's share of income gains has gone to the wealthiest residents contradicts the basic American belief that hard work should pay off — that the people who contribute to the nation's economic growth should reap their share of the benefits of that growth," she wrote in the report's summary.