Tax Break For Low-Income Families To Offset Potential Sales Tax Increase
There wasn’t enough agreement in the second special session for lawmakers to renew a sales tax increase in Louisiana, but the Legislature did manage to pass a tax break for low-income families.
Jan Moller is the executive director of the Louisiana Budget Project, an advocacy group that pushed for an increase to the state's Earned Income Tax Credit.
"If you are a low-income working family, and you go to file your tax return, the Earned Income Tax Credit essentially helps you get a bigger refund at the end of the year," says Moller.
About one in three taxpaying families in Louisiana qualify for the tax break, which on average gets them about $100 on their state return. Legislators voted to increase the EITC, giving qualifying families about $40 more.
The tax break was key to members of the Legislative Black Caucus, who say relying on sales tax to fix the budget shortfall puts a bigger burden on low-income families.
"Low-income families tend to spend everything that comes in their paycheck, and so they spend a higher percentage of their income on sales taxes than a family that makes a couple of hundred thousand dollars a year," says Moller.
Democrats support the EITC as a way to even out the sales tax burden.
"Expanding the EITC is a way to get some relief, some of that money back to low-income working families who need the tax relief the most," Moller adds.
Critics pointed out that this will actually cost the state about $20 million a year, at a time when state services are facing major cuts. Moller argues it’s money well spent, because it goes back into Louisiana’s economy.
"This is gonna pay for groceries, school supplies, car repairs, things that people need to live their day-to-day life," he says.
The increase will be temporary, starting next year and ending in 2025.