The whining of local governments, getting undeserved fat checks indirectly from the state, cannot be entirely disregarded by the Legislature when it meets to consider the fate of the inventory tax credit.
It is part of a larger problem of state-local relations in government. That unhappy relationship needs marriage counseling.
Gov. Bobby Jindal’s budget plan proposes to keep the inventory tax in place, but it suggests a huge curtailment of a program through which the state, for the last two decades, has refunded all inventory taxes paid by businesses to local governments. Instead of killing the refund program — which industry views as a $400 million tax hike — business leaders propose simply getting rid of the tax, a plan Jindal has said he’d support.
Yet either way, that would devastate the parishes who have depended for years on the inventory tax credit: The businesses pay the parishes but then get a state tax credit. It’s a wash for the businesses.
The system was a way, decades ago, for the state to end the inventory taxes, at least as far as businesses were concerned. Ending the credit would thus indirectly hit local governments. Yet the moral case for local governments is not strong.
The original argument for the inventory tax credit was economic development. Consultants said Louisiana’s inventory tax was a disincentive for warehousing businesses to locate in the state.
What no one intended at the time was that the credit would blossom during Jindal’s term in office into a budget buster, benefiting local governments but at a high cost to the state. That’s a long way from the original idea of avoiding taxes on warehouses of refrigerators or microwave ovens awaiting shipment.
Despite Louisiana’s central location, the warehousing job boom never came, but the inflation of the definition of “inventory” proved a huge bonus for local governments in industry-heavy parishes. They got the revenue, and the state paid the companies back; once “inventory” became larger, the locals benefited, and the state paid and paid and paid.
It’s the picture of an irresponsible relationship.
Irresponsibility is not limited to sheriffs and the like. Lawmakers let the situation drift. Few legislators are knowledgeable about the complexities of the state-local relationship, dysfunctional as it is.
State subsidies for all sorts of things — local police pay, road repair, civic centers and exhibition halls large (the Morial Center in New Orleans) and small — engender political maneuvering and controls that are out of place in most states, if not bizarre.
Sorting all of that out in the context of a budget crisis is difficult if not impossible, especially as Jindal and, for that matter, the Jindal-influenced Louisiana Association of Business and Industry are holding to an anti-tax orthodoxy that hobbles the kind of trading that would allow one spouse to make reasonable accommodation for the other’s needs.
Calling Dr. Phil, to the State Capitol, stat.