Spending law to hike costs to LA taxpayers

While national Democrats misnamed the bill the “American Rescue Plan,” in Louisiana it really should bear the moniker the “Louisiana Left Rescue Plan” – to the detriment of Louisiana taxpayers.

This new spending law addresses an economy well on the rebound, throws lots of money to states many of which have done better than expected in the wake of the Wuhan coronavirus pandemic (whose economies suffered largely self-inflicted wounds for political reasons in the first place), and spends less than a dime on the dollar for direct payments combatting the virus. Little needed “rescuing,” much less the bonanza of debt-fueled benefits almost American will receive.

It’s part of a political strategy. Democrats will try to run for reelection by reminding folks about how many goodies they flung their way, distracting from their pursuit, even if it turns out unsuccessfully, of an extreme leftist agenda in Washington. Regardless, the damage already may have been done.

Many provisions of the spending law that redistributes and spews cash, which have time limits from two to five years, Democrats will attempt eventually to turn into permanent features, with these goals shared by their colleagues in Louisiana. It’s an agenda they never could pass in the Legislature, and it will cost Louisianans dearly.

Concerning the most obvious transfers of wealth, the law expands tax credits, with the most relevant for Louisiana the earned income and child and dependent care. The former would double in size and in reach up into income brackets, while the latter would become (like the EITC) fully refundable (for a year) while increasing the eligible offset expenses and their deductibility from 35 percent to 50 percent and also shooting eligible income brackets skyward.

The EITC doubling will cost Louisianans another $69 million for next year. The state’s CDCTC expansion will cost state taxpayers $6 million more.

Fobbed off not directly on taxpayers but onto employers who will pass this through to consumers, increases in the amounts and duration of unemployment taxes will occur because the federal changes drag states along, by forcing more people at higher amounts into the system than otherwise. Finally, extending pregnancy coverage from two months to a year for Medicaid mothers (through what the state terms its LaCHIP IV phase) will add a small amount of taxpayer costs, well less than a million dollars, only because the federal government picks up almost 99 percent of those costs.

And, to add one more wild card, the law gives states incentives to move towards home- and community-based care of people with disabilities and the elderly infirm. Louisiana is desperately out of whack on this account with the rest of the country, which the law could help to fix. Of the 46 states reporting complete data, nationally a third of such spending goes to nursing homes which typically are more costly and certainly provide for less independence of clients. But in Louisiana, nursing homes gobble up nearly half of all long-term care spending, more than in all but nine states.

Ideally and against the run of the law in general, this incentive would cause spending to shift away from nursing homes and save money. The problem is the industry has such clout in the state that it might successfully resist this. So, instead of the law causing these taxpayer costs to come down, they actually may go up.

Perhaps among the billions of federal dollars the state will receive from the law legislators might be able to shuttle some to cover the added expenses the new benefits will trigger. But this more general aid lasts just a year, and these temporary changes will endure longer. Worse, if national Democrats succeed in their strategy of baking in the extra goodies permanently, the recurring costs put more pressure on state finances on an ongoing basis (unless, of course, the Legislature mans up and abolishes the offending items, such as the state version of the earned income tax credit, of course over Democrat Gov. John Bel Edwards’ vetoes).

The Louisiana left and allied special interests receiving the largesse no doubt thrill at this advancement of their agenda. Every other Louisianan, not so.