Small businesses are the indisputable engines of job growth; therefore, the most effective way to jump-start Louisiana’s economy is by supporting those businesses and entrepreneurs in our rural and urban communities. That’s why the reauthorization of Louisiana New Markets, an issue coming up in the Legislature this week, is so vitally important to our state.
Not all tax credits are created equal, and New Markets is special in that it is designed to generate more tax revenue than it costs. The Georgia Tech Enterprise Innovation Institute recently studied Louisiana New Markets and concluded that over 3,300 jobs in the state’s small businesses can be attributed to the program and that Louisiana New Markets has actually generated $2 in state tax revenue for every $1 in forgone revenue. Further, since the program’s inception in 2007, the $102 million in tax credits authorized have incentivized over $505 million in investment in Louisiana businesses — a nearly 5-to-1 return.
With the reauthorization, New Markets will immediately infuse another $65 million of private capital into small businesses within one year through a public-private partnership. The private sector, not government, will make the upfront investments and keep that money invested for seven years. The tax credits are delayed for three years, and then the government is responsible for contributing only $10 million a year for the next three years.
Louisiana New Markets leverages the successful federal New Markets initiative, a bipartisan effort supported by every administration and Congress in the last decade. A 100 percent federal match requirement sets a high standard for applicants by ensuring that only the most deserving businesses receive funds.
Rather than discuss New Markets in the abstract, though, we can point to and be proud of a number of small businesses across the state that have benefited from the program. Consider GAME Equipment, where a local entrepreneur wanted to expand his manufacturing plant in Napoleonville. Traditional financing was unavailable because of existing leverage and cash-flow constraints. Funding under Louisiana New Markets enabled the company to expand from solely producing pineapple-harvesting equipment to producing a full line of sugar cane harvesters and heavy tractors.
Also consider Alta Max, a supplier of military and commercial packaging products whose manufacturing facility was severely damaged during Katrina. Through Louisiana New Markets, the company has more than quadrupled its sales force and tripled its workforce. Alta Max has also repaid its loan, funds that must now be reinvested in other deserving Louisiana companies, which further magnifies and leverages the impact of the tax credit.
Small businesses are the backbone of our economy, and our job creators need the private financing Louisiana New Markets incentivizes.
Walt Leger III