Within a few days, Gov. John Bel Edwards will make one of the most consequential decisions of his governorship, impacting more people than Medicaid expansion and affecting more in tax revenue than any recent vote at the legislature.
It is the decision whether to implement the reforms to the industrial tax exemption program he issued as an executive order three months ago or whether to begin to backtrack on those reforms.
The central question at stake is to what extent local communities should be able to make decisions about their own property tax revenue.
For eighty years, Louisiana’s industrial tax exemption program has stood apart from that of any other state, and not in a good way. The program gives exemptions to corporations from local property taxes. But the local school districts, cities, fire districts and other entities losing that revenue have had no input into the decision over whether the exemptions are granted. That decision has been made for them by a state board, the Board of Commerce and Industry.
Over the years, ITEP (as the program is called) has ballooned into the single largest corporate tax exemption program in the nation, with 6,237 current exemptions costing local entities $17 billion in foregone tax revenue, or about $1,000 per household in the state.
Three months ago, Edwards issued an executive order to change all that. The industrial tax exemption program, he observed, “has become an entitlement program, not an incentive.” It is “unusually generous,” he pointed out (quoting the Tax Foundation).
Most important, the governor declared that, going forward, he only would approve exemptions accompanied by written declarations of support from the local school districts, parish governments and sheriffs being asked to give up their tax revenue.
These reforms were praised as sensible and long-overdue by nearly everyone in the state.
But not by everyone.
Industry lobbyists have been working hard to weaken the executive order, and they appear to have made headway. Edwards is now reported to be considering an “addition” to his original order.
This proposed addition would be couched in the veneer of “further reform,” because it would include a provision to limit future renewals to 80 percent of property taxes and three years (instead of 100 percent and 5 years). These “stricter guidelines,” though, only would apply to exemptions coming up for renewal 6 to 10 years from now.
The immediate and far more significant change planned for the “addition” is to waive the requirement for local input for all the exemption contracts up for renewal over the next 5 years.
That’s no mere technical matter. There are 4,612 exemption contracts in that category, costing school districts, cities, fire districts and other local entities more than $14.3 billion in lost tax revenue.
If the proposed “addition” comes to pass, a state board, once again, would be permitted to redirect all that funding from local communities to corporate subsidies, without any local input from the taxing bodies paying the tab.
Thankfully, there is still time for Edwards to do the right thing, which means, in this case, simply following his own lead. He should implement the original executive order on its original timeline — “effective immediately” — and maintain the requirement that all exemption contracts, including renewals, be required to include local input for approval.
The founders of our democracy had a rallying cry: “No taxation without representation.”
Edwards should be guided by its corollary: “No local tax giveaways unless the locals have a say!”
He may make no decision more important as governor.
Readers may see how much industrial tax exemptions are costing their parish, school districts, fire districts, etc., by visiting togetherla.com.