“The Big Tax Swap, 2008 to 2016” Who has benefited? Who has paid? And what we can do about it. Statewide Assembly May 2 nd, 2016

How do Louisiana’s taxes stack up? States across the nation rely on 4 major taxes: 1) Individual income taxes 2) Corporate income taxes 3) Property taxes 4) Sales taxes There are others: severance & mineral taxes, gas taxes, sin taxes (eg on cigarettes). But the “big four” account for about 92% of state revenues. Background Main differences between state tax systems = Different “mix” of these 4 taxes

Residents in all US states paid on average $1, th of 50 LA tax burden rank $592 LA residents paid on average Louisiana has generally low individual income taxes. Source: The Tax Foundation, 2016, p pdf How do Louisiana’s taxes stack up? LA avg vs. US avg - $478 1) Individual income taxes

$ th of 50 $55 Louisiana has very low corporate income taxes. 2) Corporate income taxes Residents in all US states paid on average LA tax burden rank LA residents paid on average LA avg vs. US avg Source: The Tax Foundation - $113 How do Louisiana’s taxes stack up?

$2, th of 50 $644 3) Property taxes (state & local) Louisiana has extremely low property taxes. Residents in all US states paid on average LA tax burden rank LA residents paid on average LA avg vs. US avg Smart Asset Property Tax Calculator - $1585 How do Louisiana’s taxes stack up?

Louisiana has EXTREMELY high sales taxes. 1 st of 50 4) Sales taxes (state & local) More than double the national average. LA tax burden rank LA avg vs. US avg How do Louisiana’s taxes stack up? + $1112 $953 $2065 Residents in all US states paid on average LA residents paid on average Now highest in the nation.

Louisiana has a very low OVERALL tax burden 47 th of 50 states P UT BRIEFLY …

But a very high SALES tax burden 1st in the nation Combined State and Average Local Sales Tax Rates

II) The Big Tax Swap, 2008 to 2016 Who has benefited?And who has paid? How has the state tax system changed?

“REGRESSIVE”: THE LOWER YOUR INCOME, THE HIGHER THE RATE OF TAXES YOU PAY.

Income Group Source: “Who Pays, 3 th edition”. “REGRESSIVE”: THE LOWER YOUR INCOME, THE HIGHER THE RATE OF TAXES YOU PAY. top 20% Who paid in 2008: LA state & local tax burden by income group $110,600 (next 15%) $60,900 (second 20%) $36,600 (middle 20%) $228,700 (next 4%) $9,800 (lowest 20%) $21,300 (fourth 20%) $1,027,100 (top 1%) 7.3% 8.9% 9.8% 5.6% 10.4% 10.3% 4.2% % of income paid in state & local taxes

7.3% 8.9% 9.8% 5.6% 10.4% 10.3% 4.2% $110,600 (next 15%) $60,900 (second 20%) $36,600 (middle 20%) $228,700 (next 4%) $9,800 (lowest 20%) $21,300 (fourth 20%) $1,027,100 (top 1%) Families earning 1/125 th of the income of the top 1% … paid twice their rate in state & local taxes. Source: “Who Pays, 3 th edition”. “REGRESSIVE”: THE LOWER YOUR INCOME, THE HIGHER THE RATE OF TAXES YOU PAY. Groups by average income % of income paid in state & local taxes Who paid in 2008: LA state & local tax burden by income group

And those were the good years! State unemployment was at 3.2%. While other states struggle, LA expects budget surplus Jan Moller, Staff Writer July 25 th, 2008 Louisiana is among a handful of energy- producing states bucking a national trend that has seen state budgets deteriorate in recent months because of the stagnating national economy. Louisiana had a $865 million budget surplus. And then …

Decision #1) The Stelly Cuts: The four DECISIONS that drove us to crisis … “Stelly cuts” happened here Led to loss of nearly $1 billion in annual revenue. Lost revenue from Stelly Cuts State Tax Revenue, by year Red line = Revenue trend line Blue line = Actual state revenue 2008 legislature rolled back Stelly income tax rates.

FY 2008: $11.3 billion FY 2009: $10.4 billion FY 2010: $8.6 billion FY 2011: $7.8 billion FY 2012: $8.3 billion FY 2013: $8.5 billion FY 2014: 8.4 billion FY 2015: $8.6 billion FY 2016: $8.5 billion State revenue plunged after Stelly cuts

Decision #2) ANNUAL STATE EXPENDITURE (State General Fund Revenue) Higher Education $ change % change $1.68 billion$918 million- $764 million - 45% (Does not include inflation or population growth.) The four DECISIONS that drove us to crisis … Unprecedented cuts to public services

- 45% The four DECISIONS that drove us to crisis … Corporate exemptions $1.37 billion $2.3 billion + $924 million + 68% Decision #3) Higher Education $1.68 billion$918 million- $764 million - 45% Higher Education Increases in corporate exemptions would have paid for entirety of higher ed cuts … $ change % change $ change % change with $160 million to spare per year. ANNUAL STATE EXPENDITURE (State General Fund Revenue) Massive increase in corporate tax exemptions

Decision #4) “The Big Swap” Using sales tax increases to replace revenue lost from income tax cuts and corporate exemptions The four DECISIONS that drove us to crisis … Increases in corporate & severance exemptions $1.1 billion hole Stelly income tax cuts $800 million hole (Swapping a more regressive tax to replace a less regressive tax is not just “regressive” – it’s wealth redistribution, from those who have the least to those who have the most.) $1.9 billion hole Sales taxes increases. (paid mostly by out-of-state shareholders) (paid mostly by wealthier households) (paid most heavily by low and moderate income residents.) CUTS TO PROGRESSIVE TAXES DIG THE HOLE REGRESSIVE TAX INCREASES FILL IT UP

From 2009 to 2012, overall income for Louisiana residents increased by 2.9%. What % of that income growth went to top 1% of LA income earners? LOUISIANA INCOME GROWTH DISTRIBUTION Economic context for the swap: What’s happening to wealth and income growth outside the tax code?

top 1% What % of that income growth went to top 1% of LA income earners? 99% And what % went to the other 99% of LA households? From 2009 to 2012, overall income for Louisiana residents increased by 2.9%. LOUISIANA INCOME GROWTH DISTRIBUTION

top 1% 99% 25% Source: In 2009, average 1% household earned $779,000 per year 2009: By 2012, avg 1% household was earning $974,376 per year 2012: + $195, : 2012: $41,414 average income per year $40,792 average income per year 1.3% - $622 Incomes for top 1% increased by nearly $200,000 per household over just 4 years. Incomes for bottom 99% declined over same period. What percent of LA’s 2009 to 2012 income growth went to top 1%? 137%! Louisiana Income Growth Distribution, 2009 to 2012

INCOME GROUP Incomes from $51,000 to $92,000 Middle 20% of households (incomes $32,000 to $51,000) Lowest-income 40% of households (incomes below $32,000) Top 1% (average income: $1.2 million) Tax impact of 2016 Special Session (Louisiana), by income group TAX CHANGE AS % OF INCOME Who’s footing the new tax bill? Increase is 6 times greater than top 1%’s. Source: “Tax incidence analysis of 2016 Louisiana Special Session,” (April 2016). SMALLEST tax increase (.14% of income) goes to … LARGEST tax increase (.83% of income) goes to … Next largest tax increase, (.72% of income) goes to … Increase is 5 times greater than top 1%’s. Next largest tax increase (.61% of income) goes to … Increase is 4 times greater than top 1%’s.

Tax Fairness Campaign