Although Louisiana’s costly menu of tax-credit programs aims to help certain industries and companies, the businesses getting the breaks aren’t the only ones with an interest in protecting the status quo.
The myriad programs have spawned a cottage industry of consultants, many of whom pay their bills by helping business owners identify tax breaks and navigate the paperwork required to get them. Some are former state bureaucrats who know the system inside and out.
Because they make a living from the tax breaks, the consultants are sometimes the staunchest opponents of any rollbacks.
“In general, any change to the tax code that is viewed as negative for a particular class of taxpayer will be heavily lobbied, will be heavily opposed,” said Stephen Moret, secretary of Louisiana Economic Development. “That could be individual companies, but in particular, there are incentives consultants who get very involved — intensely involved — in that.”
The consultants aren’t the only hidden beneficiaries of tax-credit programs.
The number and complexity of Louisiana’s various tax rebates tend “to embed a whole lot of people in the state into this tax break system,” said Robert Travis Scott, president of the nonprofit Public Affairs Research Council. For instance, the state’s film program is widely popular “not just because the moviemakers like it, but because there are a lot of people out there, especially those with large tax bills, who can take advantage of these credits and get money back. And that has built a sort of silent constituency.”
Such offshoots are not unique to Louisiana. Greg LeRoy, executive director of Good Jobs First, a left-leaning watchdog group that highlights economic development subsidies granted by states, said tax consultants tend to be some of the fiercest opponents of changing incentive programs.
In LeRoy’s opinion, many such programs — particularly Enterprise Zone incentives offered by many states, including Louisiana — are wasteful and ineffective because they offer money to businesses that in most cases would have located in a given area even without an tax break.
While Louisiana’s Enterprise Zone program was created to spur investment in economically depressed areas, eligibility has been relaxed over the years, and now the majority of the breaks it grants go to businesses building in wealthy neighborhoods.
Some states, including Louisiana, also subsidize restaurants and retailers through the program, which many economists view as folly.
But reform has proven elusive, even though Moret’s department and Louisiana’s legislative auditor have both classified the Enterprise Zone program as fundamentally broken.
Resistance has been led by tax consultants; LeRoy said they usually have more at stake than even the businesses receiving the credits.
Wal-Mart is in line to receive upwards of $300,000 for a Neighborhood Market in Covington, not necessarily a big deal for the world’s biggest retailer, but potentially real money for the lawyer or lobbyist handling the paperwork.
“So who is greasing the wheels here? Who is most interested in perpetuating such stacked decks?” LeRoy said. “It’s site-location consultants, who are highly self-interested. The way the system works justifies their existence.”
In many cases, tax consultants are paid a commission — a percentage of the money they wring from the state. LeRoy doesn’t believe that should be allowed; he thinks consultants should be paid by the hour. He also argues they should be treated and regulated like lobbyists.
One of the state’s more active tax consulting outfits, assisting with state programs such as Enterprise Zones, Quality Jobs and industrial tax exemptions, is Advantous Consulting, which is run by Don Allison, a registered lobbyist, and Jimmy Leonard.
Leonard was listed as the contact for 128 businesses approved for Enterprise Zone aid from 2008 to 2013, about 10 percent of all of the projects approved by the state during that time. In total, the businesses he represented, which included Bass Pro Shop in Livingston Parish, Cabela’s in Ascension Parish and Woman’s Hospital in East Baton Rouge Parish, were approved for $48 million in Enterprise Zone tax credits.
Allison said his firm merely helps businesses with the onerous paperwork involved with securing tax credits.
“We’re not expediting things or seeking out credits,” he said. “We’re just doing the paperwork.”
Allison wouldn’t say whether his firm is paid on commission.
From 2006 to 2014, records show Advantous Consulting and its principals also donated more than $144,000 to various lawmakers’ campaigns and political action committees, making the company one of the most generous donors in Louisiana politics.
Allison said his firm contributes to campaigns because he has many friends in the Legislature.
“The Legislature is a thankless job of good people trying to do that work,” Allison said. “I’m willing to help some of them.”
Asked what he does when lawmakers propose cuts to tax-credit programs, Allison said he does what any business owner with a stake in the outcome would do. “We certainly monitor legislation like any business would and try to stay on top of that,” he said.
Allison said he hasn’t resisted every effort to rein in tax credits. For instance, he said, he did not fight a bill the Legislature passed last year to stop giving Enterprise Zone tax credits for the creation of part-time jobs and to kick out “big-box” retailers, other than grocers and pharmacies that actually locate in the zones.
He said the business interests he represents had mixed views on the legislation, but he believed the changes would fix many of the program’s shortcomings.
As the tax consulting industry grows, it occasionally has led public employees involved in tax administration across the aisle and into the private sector.
In August, Ryan LLC, one of the nation’s largest tax service firms, hired Jason DeCuir away from the Louisiana Department of Revenue.
Ryan, which has a reputation for being aggressively involved in tax policy, particularly in its home state of Texas, occasionally works with businesses receiving credits through the Quality Jobs and Industrial Tax Exemption programs in Louisiana.
Recently, the company advocated for the passage of a bill that created sales and use tax rebates for procurement processing companies, and now Ryan stays busy with Louisiana businesses taking advantage of the exemption. That rebate is administered by the Department of Revenue, where DeCuir until recently served as executive counsel.
“His knowledge of complex tax, legislative and regulatory issues will be invaluable in the development and execution of effective public affairs strategies for our clients,” Ryan CEO G. Brint Ryan said in a September news release announcing DeCuir’s new job.
DeCuir said in an interview that he’ll be working with businesses seeking the tax exemptions, as well as lobbying the Legislature on policy. He said he will stay away from any matters that he worked on while he was at the Department of Revenue to avoid any appearance of a conflict.
Tax consultants aren’t the only ones making it difficult to tinker with the state’s incentive programs.
State Sen. Jack Donahue, R-Mandeville, noted that Gov. Bobby Jindal vetoed a bill that would have simply required the Revenue Estimating Conference to estimate and approve the annual expenditure of tax incentives; Jindal complained the bill would have had a chilling effect on business.
While Donahue disagreed with the governor, it doesn’t bother him to see businesses or tax consultants acting in their own self-interest. “That’s the nature of the beast,” Donahue said. “Lobbyists are always on one side or the other, and I don’t have a problem with them doing their job.”
Allison said tax credits make easy targets for legislators and skeptics, but he disagrees with the criticism.
“It’s really sexy right now in the Capitol to bash tax exemptions,” Allison said. “People think there’s some huge amount of revenue if all of these were repealed and money would be flowing back to the state coffers.”
In fact, he said, the programs accomplish their intended purpose: influencing business owners’ decisions to locate in Louisiana and hire local people.
“The programs we’re talking about require job creation and investment to even get the credit,” Allison said. “These do affect business decisions. Businesses are out there looking at the tax code.”
Staff writer Gordon Russell contributed to this report. Follow Rebekah Allen on Twitter, @rebekahallen.