In an era when state policymakers have given generous tax breaks to corporations and the wealthy, a new report finds that Louisiana remains one of the few states that continue to tax the incomes of the working poor.
Although Louisiana has made progress in reducing the tax burden on poor families through the Earned Income Tax Credit (EITC) and state sales-tax exemptions for groceries and residential utilities, many poor Louisiana families still owe state income taxes at the end of the year.
A new report by the Center on Budget and Policy Priorities focuses on the lowest income level at which state residents were required to pay income taxes last year. The report found:
- Louisiana was one of 11 states in which a single-parent family of three living at the poverty line still owed state income taxes. The poverty line for a family of three in 2010 was $17,374.
- Louisiana was also one of 15 states in which a two-parent family of four living at the poverty line still owed income taxes. The poverty line for a family of four in 2010 was $22,314.
- Louisiana is among 22 states where a family of three living just above the poverty line (125 percent of poverty, or $21,718 per year) pays income taxes, and one of 23 states that tax families of four earning 125 percent of the poverty line ($27,893).
Taxing families that live at or near the poverty line reduces their take-home pay and makes it harder for them to work their way out of poverty. That is why the federal government and a majority of states have eliminated income taxes on the poorest families.
It is also important to remember that poor families still pay sales taxes, payroll taxes and (in many cases) property taxes.
The fact that many poor families continue to pay income taxes in Louisiana should be troubling to policymakers, because the poor already spend a greater percent of their income on consumption taxes than middle and upper-income families.
Other states have successfully reduced the tax burden on poor families by raising the standard deduction, increasing personal exemptions or setting an income level below which families owe no taxes.
Many states go even further, and offer more generous EITCs than Louisiana does. The EITC is one of the most effective anti-poverty programs and has historically had broad bipartisan support because it encourages work, increases take-home pay, and helps families become self-sufficient.
Click here for the full report.