State Sen. JP Morrell was hopping mad.
The 2015 legislative session had just ended with an abrupt change to the tax credit program that promotes filmmaking in Louisiana, a cause dear to Morrell, a Democrat from New Orleans.
Many lawmakers had concluded that taxpayers weren’t getting a good return on their investment, and they limited the tax credit in a way that Morrell opposed. He thought they had discounted his views and were unfairly singling out the movie industry.
In time, he hatched a plan to scrutinize whether taxpayers were getting their money’s worth on the hundreds of other state tax breaks and incentive programs.
Based on his findings, he plans this year to try to kill business tax exemptions that he believes are total giveaways, and to force supporters of others to prove their worth or see them disappear.
Morrell is also seeking passage of a rule that would require the Senate to cap the cost of any new tax exemption at the amount estimated by the Legislative Fiscal Office before the Legislature votes on the measure. He noted that the Legislature has passed some tax breaks — notably for the film and solar industries — that ended up costing taxpayers exponentially more than originally estimated.
Morrell’s effort will get underway when the Legislature reconvenes April 10 for a 60-day session primarily devoted to budget and taxes.
Any tax exemptions that Morrell can persuade his colleagues to dump could help the state provide more funding for the TOPS scholarship program and other programs popular with lawmakers. They could also help address the “fiscal cliff” that the Legislature is facing when about $1.2 billion in taxes — principally a temporary one-cent increase in the sales tax — expire next year.
Morrell expects his effort will cause heartburn to business lobbyists in the state Capitol, and he acknowledges that he is pursuing an unusual strategy for someone interested in running for mayor of New Orleans this year.
“I’m certainly not making many friends and am potentially losing a lot of donors,” Morrell said in an interview in his New Orleans law office.
Morrell was angry when the 2015 legislative session ended because he had spent two years crafting a plan acceptable to the film industry that he believed would trim the cost of the film credits program that had turned Louisiana into Hollywood South while allowing the industry to remain robust.
But on the session’s final, hectic day, lawmakers instead adopted a last-minute plan that would cost taxpayers less in the short term but would cause such chaos that producers would scarcely make any films in Louisiana over the next year.
Moments after the session ended, Morrell took the unusual step of requesting permission to address his colleagues. He told them that the final maneuver on the film tax credits bill had left him feeling abandoned.
“Today I don’t feel like we’re a band of brothers. I feel like we’re a pack of wolves,” Morrell said. “There will come a time when the herd is so thin and this body will come for your (tax) exemption.”
Days later, after cooling down, Morrell began thinking that lawmakers ought to study the cost of dozens of other tax exemptions in the tax code.
“They hadn’t been reviewed in decades,” he said. “To give away $1 billion in tax exemptions with no data on the return on investment was beyond comprehension.”
A 38-year-old real estate attorney serving his third and final term in the Senate, Morrell got the chance to turn his idea into practice when Senate President John Alario, R-Westwego, named him in 2016 to chair the Revenue and Fiscal Affairs Committee, the panel that hears tax legislation. (While the House is generally divided by political party, Alario runs the Senate in a bipartisan fashion.)
Morrell decided to have his committee examine sales tax exemptions, one by one, throughout last year’s legislative session. He invited anyone who wanted to defend the tax exemptions to testify at the hearings. The Department of Revenue prepared a background document on each exemption. In all, the Revenue and Fiscal Affairs Committee scrutinized some 200 sales tax exemptions over 14 hearings lasting a combined 35 to 40 hours.
One development surprised Morrell: No one showed up to support many of the tax exemptions. Those breaks — the ones with no visible constituency — are likely to top the list of exemptions that he will seek to kill this year.
“It’s disappointing when we are not collecting revenue and the people benefiting don’t feel like they have to justify it,” Morrell said. “It made me and the committee very angry.”
In some cases, Morrell became convinced that several tax breaks he had viewed skeptically actually provide a good return to taxpayers. One example: the provision that exempts horizontal drilling for wells from severance taxes.
“Having industry officials show up and spell out why the credit was necessary for the industry was educational,” Morrell said.
In many other cases, he was left dubious about a tax exemption’s benefits and will ask that it be revised to automatically end, or "sunset," in two or four years — giving its supporters the chance in the meantime to persuade the Legislature to keep it alive.
Morrell plans to try to limit a sales tax exemption for dealers of gold, a break whose value has yet to impress him.
What’s not clear is how much support his efforts will garner.
Stephen Waguespack, who is president of the powerful Louisiana Association of Business and Industry, did not respond to a request for comment. LABI lobbyist Jim Patterson sat through Morrell’s hearings.
Sen. Dale Erdey, R-Livingston, vice chairman of the Revenue and Fiscal Affairs Committee, did not return calls on whether he plans to support Morrell’s effort.
Any of Morrell’s bills that pass the Senate would next move to the House Ways and Means Committee. Rep. Neil Abramson, D-New Orleans, who has the key role of chairman of that committee, said in an email that he couldn’t comment on Morrell’s bills because he hadn’t seen them yet.