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Concrete rules best to mitigate order's effect

Even if Baton Rouge or every other local government now permitted to rule on property tax exemptions always gave maximal breaks, the damage has been done for at least the next 21 months.

Within a year of assuming office, Democrat Gov. John Bel Edwards issued an executive order regarding the Industrial Tax Exemption Program. The law it addressed allows the governor to cancel local property taxes entirely for up to 10 years.

Edwards changed that, saying he would allow only five years’ worth at 100 percent and three more at 80 percent. Further, he would allow local government input that could make those numbers even less advantageous.

This set off a flurry of activity by those agencies to devise ways of implementing this newly-found power. East Baton Rouge Parish has provided one of the most high-profile, with formation of a committee to create a uniform rubric for affected agencies (although not including the school systems of Baker, Central, and Zachary). Almost two years after the fact, it still hasn’t come up with a methodology, with various competing plans up for consideration. Tomorrow, it may decide on one.

The order’s promulgation created a specter where local governments and the special interests that supported their governing majorities would use this leverage to promote their agendas, particularly in spending more money. This effect has engulfed Baton Rouge and only has grown.

Together Baton Rouge, an affiliate of the far-left Industrial Areas Foundation founded by Saul Alinsky, has stumped early and often for the most restrictive rules that could grow government coffers significantly. The Louisiana Association of Educators teacher union also has joined the fray, declaring a similar position. Keep in mind the public will pay whatever extra tax dollars would get collected, through higher prices passed along by the entities involved.

Louisiana’s propensity for shoveling most of its property tax burden onto the entities that would qualify for ITEP makes them particularly sensitive to uncertainty surrounding the program. Earlier this year, Exxon Mobil decided to expand its Beaumont, TX facility rather than Baton Rouge’s, and it’s hard to imagine that the uncertainty surrounding ITEP didn’t play a role in that. The company says it still might do so in Baton Rouge, but that the situation remains the same and it finds this troubling, which suggests a continuing disincentive.

Had Edwards stopped at imposing his rules without local government input, even this could be defended intellectually: companies would know exactly how they qualify and be able to compute whether additional spending would be cost effective. But if every single application becomes a matter of judgment by local politicians, potential investors only can fear worst case outcomes and this will serve as a powerful disincentive to them.

Thus, whatever East Baton Rouge and other jurisdictions puts together must leave no discretion. And whatever they do, they must recognize that potential adverse consequences, both in terms of investments forgone and additional money lifted from people’s pocketbooks, of the standards they formulate, and consider that in their decision-making. Until the convoluted property tax regime changes or Edwards’ successor repeals the order, that’s the best that can be expected.

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