Representatives narrowly defeated
state Rep. Walt
Leger’s HB
70, denying it by five votes, which would double the credit to seven
percent of the federal version. About half the states have this, with
Louisiana’s the lowest and the only southern state on the list. The federal program
is particularly generous for families with children: while the 2015
levels mean that a single person working minimum wage full time gets almost
nothing from it, a single mother raising three children making three times
minimum wage still would qualify for a higher rebate.
And rebate it is, for even making
that amount of money, the latter household (assuming the mother’s wage is the
only cash income, although this family also likely would qualify for some other
assistance programs as well), the size
of the credit not only would wipe out all income tax liability but also
give back over $2,000 more than that (and this does not include other tax
credits that this family would qualify for, such as child care). This is why
the current Louisiana credit costs $47 million annually and the federal one yearly
now over $60 billion – more
than what is spent on the higher-profile, more-criticized Temporary
Assistance for Needy Families cash benefits program, making it the most expensive
cash benefit program in the nation.
In fact, the EITC does not do a
whole lot to address the “poor” if defined as does the federal government
relative to its federal poverty limit. For 2015, the adjusted gross
income under which the EITC may be claimed in the least generous case, a single
person, is about $3,000 over the FPL, while in the most generous case, married
with three children, it’s almost $25,000 higher or almost double. As a result, research
suggests its benefits end up being exercised as much by households with
children that are not defined as “poor” even if they are lower-to-middle income
as those defined as being in poverty. In fact, households can be very asset
rich, but as long as their incomes are low, they still qualify for the EITC.
Studies also determine that the
EITC’s impact on seeking employment is marginal to nil; it provides little
motivation to seek work, where compulsory measures end up the main driver of
this. It does seem to have a small impact on job retention; that is, after the
compulsory measures such as time limits on not participating in an assistance
program expire, the EITC discourages quitting working and accessing more cash
benefits.
However, its main substantive
problem is the disincentive it provides to work past a several level. The
rebate acts as a per hour subsidy, so a full-time wage can be earned with
part-time work. That also dampens motivation to seek higher-paying work, so
together these facets exacerbate underemployment. In short, while the EITC can help
reduce the poverty of that subgroup whose abilities would bring little return
in the marketplace, it also pays others not to work as much or as well.
Yet worse is its procedural
problem, in that the program
is rife with fraud because of its lax construction and enforcement.
Typically, ineligible recipients or eligible recipients who inflate the value
of the credit abscond with a quarter of the money paid out, meaning nearly $12
million annually cheated out of Louisiana taxpayers.
To summarize, the EITC does reduce
poverty to a degree, but in a wasteful, inefficient manner when other
alternatives exist. More strenuous work requirements – relaxed
during the Pres. Barack Obama
Administration – would improve the program, or replacing it with a wage
subsidization program (otherwise known as a negative income tax) that would
subsidize employers offering full-time jobs that operates much more efficiently
(including much less fraudulently) and reduces the propensity of EITC
recipients to trade work for subsidized leisure.
But from the rhetoric coming from
Democrats such as Leger and state Rep. Pat Smith in
debate about the bill, you’d never have known any of this. Their support for
this increase – when wiser policy would abolish it, as an amendment offered by
state Rep. Alan
Seabaugh until withdrawn would have done – fits their disturbing pattern of
advocating the spending of more of the people’s money on a “solution,” no
matter how ill-suited to actually addressing a problem adequately these may be and
especially when better options exist, and then accusing opponents to such
flawed policy of favoring other interests, such as business. Demagoguery,
rather than reasoned analysis, is their stock in trade.
And that’s why Louisiana continues
to suffer budgetary troubles. Symbolism trumps substance in fiscal policy: it
looks good and may make you feel better to redistribute money to the “poor”
regardless of whether they act in ways that deserve taxpayer assistance, and
any other view is considered illegitimate and therefore defines opponents as
cretins. Or you can claim to create jobs in a glamorous
industry such as movies or in a trendy one that allegedly
saves the planet regardless of the fact that both the motion picture
investor tax credit and the solar installation tax credit costs taxpayers multiple
tens of thousands of dollars for each job.
Altogether, these waste hundreds of
millions of dollars a year, yet this year barely any legislative effort
succeeded in reining them in, much less getting rid of them. And then those who
would make the problem worse have the arrogance to call those providing genuine
and sustainable paths towards greater budget solvency names instead of having
open minds and a willingness to explore all policy options.
Leger hopes to try again with this
bill, but its flaws remain unaddressed, and legislators do the state a service
by not giving it another chance.
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