News Intro Text
by Ali R. Bustamante, JSRI Economic Policy Specialist
Date
News Item Content
<p>by Ali R. Bustamante </p>
<p>Since June 2014, the average price of a barrel of oil has fallen from more than $100 to about $50.[1] Many states, including those in the Gulf South, are considering budget cuts to higher education and health care services in order to deal with oil revenue shortfalls. However, contrary to what state budget offices profess, pressure to cut the budgets of education, health, and social services stems from the inadequacy and regressive nature of tax structures and not from oil revenue shortfalls.</p>
<p><strong>Oil Revenues Have Long Lost Importance </strong></p>
<p>On average, sales and excise taxes, property taxes and state income taxes individually contribute more to state and local revenues than oil revenues in the Gulf South. The portion of the state budget linked to oil and gas revenue is about 13 percent in Louisiana and only 4.5 percent in Texas, the Gulf South’s two most oil-dependent states.[2] Conversely, sales and excise taxes alone represent 33.6 percent of state revenues in Louisiana and 31.7 percent in Texas.[3]</p>
<p>In the 1980s oil and gas revenue represented a much larger portion of state revenues—about 45 percent in Louisiana and 20 percent in Texas.4 A sudden shift in oil prices had the power to fuel a spending bonanza or to cripple state budgets. However, since the 1980s, the economies of the Gulf South have diversified and a smaller share of state and local revenues, as well as state and local employment, is tied to oil and gas than in past decades.</p>
<p>Today, a steep drop in oil prices no longer drives the Gulf South into recession or necessitates cuts in education and health services because these programs are largely funded by income and sales taxes. However, the increased stability of state and local revenues has come at a cost increasingly paid by low- and middleincome families.</p>
<p><strong>Unfair Taxation</strong></p>
<p>A new report from the nonpartisan Institute on Taxation and Economic Policy (ITEP) titled Who Pays: A Distributional Analysis of the Tax Systems in All Fifty States reveals that all state and local tax systems in the U.S. are regressive and unfair.[5] Florida and Texas have the second and third most regressive tax systems in the U.S. while Alabama, Louisiana, and Mississippi rank 12th, 19th, and 21st respectively.</p>
<p>In regressive tax systems, low- and middle-income families pay a greater share of their income in taxes than the wealthy. Progressive systems do the opposite, requiring higher tax contributions from those with more ability to pay. Catholic Social Teaching supports progressive taxation systems as just and equitable systems that reduce severe income and wealth inequalities.[6]</p>
<p>States in the Gulf South place a disproportionately greater burden on lowand middle-income families to sustain state and local tax revenues. The effective state and local tax rates by income level in the Gulf South show that the poorest families, the bottom 20 percent, pay at least two times more of their income in taxes than the top one percent.</p>
<p><a href="https://jsri.loyno.edu/sites/loyno.edu.jsri/files/Overtaxing the Poor Spring 2015_0.pdf">MORE>></a></p>
<p>Since June 2014, the average price of a barrel of oil has fallen from more than $100 to about $50.[1] Many states, including those in the Gulf South, are considering budget cuts to higher education and health care services in order to deal with oil revenue shortfalls. However, contrary to what state budget offices profess, pressure to cut the budgets of education, health, and social services stems from the inadequacy and regressive nature of tax structures and not from oil revenue shortfalls.</p>
<p><strong>Oil Revenues Have Long Lost Importance </strong></p>
<p>On average, sales and excise taxes, property taxes and state income taxes individually contribute more to state and local revenues than oil revenues in the Gulf South. The portion of the state budget linked to oil and gas revenue is about 13 percent in Louisiana and only 4.5 percent in Texas, the Gulf South’s two most oil-dependent states.[2] Conversely, sales and excise taxes alone represent 33.6 percent of state revenues in Louisiana and 31.7 percent in Texas.[3]</p>
<p>In the 1980s oil and gas revenue represented a much larger portion of state revenues—about 45 percent in Louisiana and 20 percent in Texas.4 A sudden shift in oil prices had the power to fuel a spending bonanza or to cripple state budgets. However, since the 1980s, the economies of the Gulf South have diversified and a smaller share of state and local revenues, as well as state and local employment, is tied to oil and gas than in past decades.</p>
<p>Today, a steep drop in oil prices no longer drives the Gulf South into recession or necessitates cuts in education and health services because these programs are largely funded by income and sales taxes. However, the increased stability of state and local revenues has come at a cost increasingly paid by low- and middleincome families.</p>
<p><strong>Unfair Taxation</strong></p>
<p>A new report from the nonpartisan Institute on Taxation and Economic Policy (ITEP) titled Who Pays: A Distributional Analysis of the Tax Systems in All Fifty States reveals that all state and local tax systems in the U.S. are regressive and unfair.[5] Florida and Texas have the second and third most regressive tax systems in the U.S. while Alabama, Louisiana, and Mississippi rank 12th, 19th, and 21st respectively.</p>
<p>In regressive tax systems, low- and middle-income families pay a greater share of their income in taxes than the wealthy. Progressive systems do the opposite, requiring higher tax contributions from those with more ability to pay. Catholic Social Teaching supports progressive taxation systems as just and equitable systems that reduce severe income and wealth inequalities.[6]</p>
<p>States in the Gulf South place a disproportionately greater burden on lowand middle-income families to sustain state and local tax revenues. The effective state and local tax rates by income level in the Gulf South show that the poorest families, the bottom 20 percent, pay at least two times more of their income in taxes than the top one percent.</p>
<p><a href="https://jsri.loyno.edu/sites/loyno.edu.jsri/files/Overtaxing the Poor Spring 2015_0.pdf">MORE>></a></p>