Taxpayer-subsidized massages for movie star Matt Dillon. Government giveaways to help retailers locate along Baton Rouge’s congested Bluebonnet Boulevard. Financial incentives to encourage energy exploration, already a robust industry in Louisiana.
It’s hard to make sense of Louisiana’s patchwork system of business tax breaks.
But reform is coming, because the cost of six key giveaway programs has grown fivefold in just a decade and nearly everyone agrees that we can’t afford them anymore.
Here’s a look at the programs:
- Enterprize Zone tax breaks. This program originally was limited to aiding businesses that located in distressed areas. The Legislature blew it in 1999 when it opened the program statewide but made a good move in 2013, limiting breaks for retailers except in poor areas. The break should be reserved for pioneering entrepreneurs in areas where employment is scarce.
- Film incentives. Louisiana has eclipsed Hollywood as the nation’s moviemaking capital, but at great cost. Legislators have spent a decade closing loopholes in a poorly designed program that has produced a parade of jaw-dropping scandals. Even Drew Brees got ripped off. It’s doubtful that Louisiana can grow as a filmmaking mecca without backbreaking giveaways, so the annual state outlay for this program must be capped. Supporters of the incentives talk of adjusting the payout formulas, but we’ve been doing that for years, and the cost has climbed by 500 percent. Another needed reform: The state, not Hollywood, should pay for and control the audits of film-related expenses eligible for reimbursement.
- Industrial tax breaks. It’s the price of natural gas that’s chiefly fueling Louisiana’s industrial boom, but tax breaks do play a role. Still, Louisiana is among the leaders in awarding big-ticket deals and, in some cases, the costs per job are eye-popping. The biggest giveaway is the state’s ability to waive local property taxes, and local officials should have a say in those decisions.
- Horizontal drilling incentive. Louisiana has been welcoming to energy firms and to fracking, and our state has prospered for it. But the companies are here because we have the resources. The tax break that benefits this technology was adopted before the technique was perfected, and it has grown 24,000 percent.
- Inventory tax rebates. Few states have an inventory tax, so Louisiana was right to do away with ours. But the solution, having the state reimburse companies that pay taxes to the parish where they are located, has created a system that subsidizes parishes with heavy industry. Those parishes already have an advantage in terms of tax base, so they should not need this additional boost. The cost of the break has tripled in a decade, raising questions about whether the state is verifying the expenses claimed by businesses.
- Solar tax breaks. Louisiana’s tax break for solar panels is the nation’s most generous. Solar energy enjoys federal tax advantages and is getting less expensive. So the state is appropriately ending this subsidy in 2017.
The future of the tax breaks will take center stage in next year’s gubernatorial race. To pay for the giveaways, the state has implemented massive cuts to higher education, forcing increases in tuition that are piling debt on our young people. Young voters should demand better, and so should their parents.