The state continues to struggle with structuring its fiscal system to promote economic development. Its 469 tax exemptions have come under particular scrutiny, with a recent panel convened by law recommending elimination of many. In response, instead, the Legislature tinkered around the margins and in net made no improvements to a structure that exempts as much as it collects.
This followed an effort made by Gov. John Bel Edwards to alter granting of Industrial Tax Exemption Program benefits that affects local governments, through executive order. His one-size-fits-all approach fails to distinguish among the economic value brought by the request and, even after slight modification, invites politicization of the process.
Now entering the debate, pushed by the Alinskyite organization Together Louisiana comes the founder of their ally Good Jobs First, a pro-union group funded by wealthy leftist backers. It has applauded efforts by Together Louisiana to strangle ITEP and sends Greg LeRoy to spread its one aspect of its wealth redistribution agenda.
Good Jobs First throughout its history has declared war on corporate tax exemptions while giving a pass to wasteful government deals such as bloated pensions. Governments should pursue thorough vetting of all tax exemptions, and no doubt Louisiana has its share of wasteful ones such as the Motion Picture Investors Tax Credit, but Good Jobs First declares a pox on all corporate tax deals, seemingly never having met one it likes. Further, it condemns such arrangements only in the context of how much revenue these allegedly cost government and never investigate the related question of how these should fit into a fiscal structure that maximizes economic growth, only going so far as to encourage transferring wealth from citizens to government and special interests.
As a case in point, LeRoy conceptualizes Louisiana’s approach as “putting so many eggs into the petrochemical basket.” But a relative pittance of state exemptions excludes income from oil and gas activities. Combined natural resource severance tax exemptions total fewer than $300 million, compared to the higher exclusion amounts granted to consumers of gasoline of over $400 million, or to the entire total exempted for all sources of nearly $7 billion.
Fossil fuel firms do also benefit from a state rebate of local property taxes on inventory, to the tune of around $200 million annually that includes businesses from all sectors. But in its review of Louisiana policies, that one doesn’t seem to interest the outfit, perhaps because it acts as a pass-through of state taxpayer dollars propping up, disproportionately for some of them, parish tax spending.
But the lack of sophistication in Good Jobs First analyses really stands out. For example, even if the natural gas consumption exemption costs the state a wildly fluctuating amount – over $400 million in fiscal year 2014, but about an eighth of that three years later – it might deliver more in the way of benefits since it induces industrial activity that may generate more in revenues than forgone in exemptions. Yet the group seems loath to approve of any exception tied to a corporation.
And never in the Good Jobs First ideology appears any recognition that forgoing inefficient exemptions, where these exist, should translate into lowering overall corporate tax rates. Its rhetoric always assumes that any forgone lost dollars should become increased government spending and that imposing higher costs on businesses will not negatively impact jobs and salaries.
Any discussion of excising tax exemptions must include all, not just business-related, exceptions, and must take place in the context of revenue neutrality, which will require lowering individuals and corporate marginal income tax rates and sales tax rates if lopping off tax breaks. Otherwise, it becomes merely an exercising in growing government, the wrong approach in state which features an outsized public sector at all levels.
Unfortunately, that’s a conversation the likes of Good Jobs First and Together Louisiana will do everything in their power to avoid. In reality, that must be fiscal reform conversation.
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