BATON ROUGE — The Senate voted 30-5 to increase the state’s earned income tax credit by 42.8 percent to offset some the impact that a renewal of part of the state’s sales tax would have on the working poor.
The state’s earned income tax credit is 3.5 percent of the amount of a similar federal credit. Morrell’s bill would increase it to 5 percent.
But his bill also would need to pass the House, which killed two similar bills in committee on Friday.
Increasing the tax credit would cost the state an estimated $21 million in revenue, making it a tough sell amid the state’s current budget crisis.
The credit is targeted at low-income families and has been pushed by the Legislative Black Caucus as a way to offset some of the several hundred million dollars that the state would collect from an extension of a part of the penny of sales tax due to expire this summer.
Sales taxes are generally seen as regressive tax that have a disproportionate impact on lower-income people.
Morrell noted the federal earned income tax credit was created during the Reagan administration to aid the working poor.
“I always find it ironic that I have to defend a program founded by Ronald Reagan to conservatives,” Morrell said. “This is a program that is meant to encourage people to work. It’s not welfare — you have to earn money to make money.”
Sen. Norby Chabert, R-Houma, echoed Morrell’s argument and praised the bill for encouraging citizens to work.
“We talk all the time about putting money back in the pockets of the working people — these are the workers of the state,” Chabert said. “This is your opportunity to give back to the little man.”
In his closing comments for the bill, Morrell criticized the Legislature for returning to a regressive sales tax to raise revenue while continuing to defend lucrative corporate tax incentives.
“I will take this EITC and I will remind every single one of you how in the heck you can defend business tax exemptions that are tens, if not hundreds of millions of dollars, and not support a program which gives an extra $95, on the high end, to 42 percent of our citizens,” Morrell said. “Think about that. This directly impacts 42 percent of our constituents who can barely make ends meet and we’re about to tax them again.”
Senators Conrad Appel, R-Metairie; Jim Fannin, R-Jonesboro; Sharon Hewitt, R-Slidell; John Milkovich, D-Shreveport, and Danny Martiny, R-Metairie voted against the bill.
Sen. Neil Riser, R-Columbia, proposed an amendment that would tie the increase to the earned income tax credit to the expected extension of the sales tax. The amendment was adopted without objection.
PHOTO: The Senate passed a bill by Sen. J.P. Morrell, D-New Orleans, to expand a tax credit for the working poor to offset some of the impact of a possible sales tax extension. (Photo by Sarah Gamard / LSU Manship School News Service)