If Louisiana legislators remain invested in the same ideology that has
spawned the hundreds of tax exceptions, not a single constructive thing will
emerge from the effort.
Last week, the Revenue Study
Commission reviewed a number of these in an effort to parse out whether
policy as it exists in this regard optimally forgoes revenues because of these
exceptions. Part of the exercise allowed arguments, particularly from current beneficiaries,
stating cases as to why their breaks, some of which on the surface seem very
questionable, should continue.
And so we got from them arguments like Lt. Gov. Jay Dardenne’s, who
oversees arts policy as part of his portfolio, defending the sales tax
exemption on art sales in the state’s designated 63 arts districts, who claimed
it was a economic redevelopment tool that cost only $500,000 over the past two
years but the districts themselves had economic activity of over $1 billion.
Bullion dealers say introduction of a sales tax exemption on sales above $1,000
caused their business to increase many times. A representative with the New
Orelans Jazz and Heritage festival said a new exemption applies to sales tax on
admission and vendor sales helps “maintain a ticket price that is reasonable.”
Supporters misinform and mislead in three ways with statements such as
these. First, they phrase their objections, with little to no evidence supporting
such contention, in a way implying that the break produces the “economic
activity.” In real life, that is if not entirely, almost wholly untrue: some to
perhaps a lot of this activity would occur without the break. The law of supply
and demand exists independently of these activities. Art and bullion still
would sell, just a little less of it as the tax would price a few marginal
consumers out of the market. That alleged $1 billion or more in activity would decrease
a little. However, the markets would not collapse without the subsidy.
Second, they assume that the money forgone through the break, by being
left in the pockets of the subsidized activity, has gone to its best and
highest use in terms of state goals, which in the case of tax policy is related
to economic development. Again, this is unlikely in almost every case. For
example, let’s review the situation regarding crossings of the Red River
between Shreveport and Bossier City. There are five bridges currently, four with
four-lanes, but the southernmost, the Jimmie Davis Bridge connecting two of the
fastest growing areas, has only two lanes. Estimates are it would cost in the
area of $100 million to add another span. Would it not mean a lot more economic
development to a whole lot more people to spend $100 million on this purpose than
it would be to hand it out to, among others, a small coterie of art dealers, bullion
dealers, and festival attendees?
Third, existing policy myopically picks and chooses the winners and
losers of breaks without any real attempt to connect the results to a
philosophical understanding of the purposes of state policy. Ideally,
government should fund activities only very necessary to the functioning of
society, or in other words those that maximize the chances of individuals
through their own means to pursue their chosen ends that minimally interfere with
others choosing to pursue their potentially different ends – that is, funding common
goods the market provides only with difficulty if at all.
If viewing the exception issue using these examples in a scenario of
direct redistribution, obviously a doubling of bridge capacity is going to do
much more for economic development if forgone revenues get spent that way, and
is something that individuals cannot do themselves. Contrast this to the
alternative of leaving in the pockets of dealers, those who choose to attend
festivals, and similar narrowly targeted areas that affect commerce to a much
lower degree, and the much smaller impact on commerce that therefore would
occur. Or, using a scenario that does not redirect funds but instead spreads
the break over far more individuals by trading breaks for lower overall rates,
the greatly expanded pool of individuals involved provide much more information
to markets in allocating resources optimally than when kept among many fewer
and thereby increases chances of optimal allocation for economic development
purposes.
To put it more plainly, how much subsidization of art should government
engage in, when private markets and philanthropy exist already in that area of
activity the support of which does little to allow all individuals to pursue
collective means to assist them in pursuing individual ends, as opposed to
building a bridge, which will not be done besides by government and would cast
a far wider net over and have a far greater impact on the ability to pursue
individual ends? By definition, government is a money-losing enterprise that
operates from permitted confiscation of wealth, so the question becomes what
money-losing activities does society as a whole value enough to permit
subsidization of them – understanding that in a world of finite resources choices
must be made that, absent a larger moral consideration, should promote the greatest
value to the greatest number?
This is the kind of debate that needs to occur – and, from the
published comments put forth by legislators involved, is not. That many of them
seemed to have the attitude of state Sen. Jack
Donahue who volunteered that in performing this review that “We don’t want
to make you less competitive,” indicates acceptance of some perverse notion
that government ought to be in the job of picking who should be made more or
less competitive. Rather than make this statement, the question needs to be
asked “Why are we making you more competitive as opposed to alternative uses of
these funds as they relate to the interests of the entire state?”
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