End, don't mend, both solar and film giveaways

It’s a start to reducing wasteful spending in Louisiana government, but the timidity involved seems unlikely to start the snowball rolling necessary to deal significantly with the larger problem of wealth transfer of the many to the few.

HB 705 by state Rep. Erich Ponti would reduce over the next three years the subsidization the state provides to the solar industry and to individuals with means or to those assisted by the industry. It also eliminates entirely the wind power subsidy, which has deprived the state of little money. The problem comes from solar: it has cost the state over four years nearly $39 million.

Unfortunately, the bill mends but does not end the giveaway. It has showered cash onto solar energy installers, where the exorbitant 50 percent credit with the federal 30 percent version allows Louisiana property owners to install systems for as little as $5,000 – a cost often waived by installers in order to get a $20,000 handout from American and Louisiana taxpayers as they still could make money off the deal. It also has allowed the number of power users, as the number of these owners has increased as a result of the gifting, to get preferential power rates at the expense of other ratepayers, their lower rate meaning others must pay more to make up the difference. The bill allows the installation subsidy to continue, but at a lower level of reimbursement.

This bill passed committee this week, but much better would be on the floor to amend it to eliminate the credit, even if over a few years. There’s simply no legitimate reason to allow the transfer of wealth from taxpayers to a few to continue. If solar energy has so many benefits, then let the marketplace decide how much business it generates, rather than have government rig things in the favor of the industry.

Despite that flaw, at least this bill’s success to date promises potentially that a much bigger fish may be landed – the end of motion picture investor tax credits. Since their creation over a decade ago, their transfer of wealth into the hands of the wealthy and non-Louisianans has dwarfed that of the shorter-lived solar credits, perhaps now as much as $500 million in excess of the benefits brought to the people’s coffers.

We don’t know for sure as the latest figures are from fiscal year 2010, when the state paid out nearly $200 million to get back $27 million in taxes, or a net loss of almost $170 million. Most of this takes the form of forgone tax collections from wealthy Louisianans, including state elected officials, who can buy the credits from the mostly non-Louisianans who make the film and other productions who get far more of those than they can use.

Legally, the state must supply an economic analysis of the program every odd-numbered calendar year, but the statute does not specify when that needs be done. Historically, it has been released around the beginning of the legislative session, but nothing yet has been forthcoming from the Department of Economic Development that probably would reflect even larger state subsidization than ever before.

Possibly this comprises a sitzkrieg strategy that hopes to run the clock out on the legislative session. With the Legislature constitutionally unable to consider reductions in tax credits in regular sessions in even-numbered years, bureaucrats and their partners in the film industry may hope that if they can delay release of more damaging information this will not rile legislators to the extent that they will alter the program’s rules to their detriment. If a bill – and there are a couple out there that seek the potential sunset of this and other credits – does not start moving by Memorial Day, these special interests will be home free for at least another couple of years

Policy-makers should not become inattentive on this. Besides amending Ponti’s bill as described above, it could have added to it a phaseout or even entire dismantling this year of the film tax credit as well. (And something any builder of an alternative budget should keep in mind.) In times of budgetary stress leading to reductions in both health care and higher education, it disserves the state to continue programs that inordinately privilege a few at the expense of programs that serve many.