Louisiana’s decision to rein in its most lucrative corporate tax break brought $282 million in tax revenue back to local services like police departments and schools last year, a new report found.
The report, authored by the think tank Institute for Energy Economics and Financial Analysis, in conjunction with Together Louisiana, a proponent of the rollback, says the state’s Industrial Tax Exemption Program was “excessively generous” before Gov. John Bel Edwards scaled it back. The report says those changes have brought $16 billion in industrial property back onto the rolls, without sacrificing new industrial projects. In total, $761 million in tax revenue has flowed back to local governments from 2016-2021.
Edwards’ changes, made by executive order in the governor’s first term, limited the amount of industrial property that can be exempt from property taxes and added other rules. They netted $115 million for parish services, $113 million for schools and $55 million for law enforcement, largely in heavily industrial parishes along the Mississippi River and in southwest Louisiana, the report said.
The Institute for Energy Economics and Financial Analysis, which advocates for a quicker transition to a “a diverse, sustainable and profitable energy economy,” attributes virtually all of the growth in industrial property on Louisiana’s tax rolls to the changes Edwards made. Taxable property in other business categories remained nearly flat from 2016 to 2021, the time period analyzed. Together Louisiana scheduled a press conference for 10 a.m. Tuesday to tout the report.
Business groups who hold immense power at the state Capitol have argued Edwards’ rollback of the program has hurt industry, putting the state at a disadvantage in competing for capital-intensive projects. The Louisiana Association of Business and Industry and other business groups earlier this year killed a proposal pushed by Together Louisiana at the Legislature to enshrine the changes in the state constitution.
The report, though, says the ITEP reforms “appear not to have had a negative impact on industrial capital investment statewide.” Capital investment in the five years after the changes was about 50% higher than in the five years prior, the report says. Also, in almost every case where at least one local entity voted to reject the exemption, the project still went forward, according to the analysis.
The report found similar results to a study Together Louisiana conducted as part of its effort to make the changes permanent in the Legislature.
Edwards, a Democrat, is term-limited, and proponents of his changes to ITEP are worried the next governor, likely a Republican, will toss them out after the 2023 elections, restoring the all-encompassing tax breaks on industrial investment that Louisiana firms enjoyed for decades.
Edwards touted the report in a statement, saying it shows his changes to the program were "the right thing to do."
"Make no mistake: anyone who says they want to undo our ITEP reform is really saying they want to defund local governments, defund schools, and defund the police," Edwards said.
The program now offers an 80% tax break and has more stringent rules for what type of projects qualify. For instance, companies previously got tax breaks for routine additions and maintenance spending that no longer qualifies. The report, which analyzed a sample group of 206 companies that account for 95% of the exempted property, attributes much of the new revenue to the fact that companies are less likely to pursue "gratuitous" exemptions, especially if they have to justify them to local governments.
The changes also gave local sheriffs, parish leaders and school boards a vote on whether to grant the tax breaks. Previously, an obscure state board decided whether to approve the applications, even though property taxes go to local entities. To try to get the bill to enshrine the changes through a hostile Legislature this year, proponents amended it to only include that component, but lawmakers still rejected it.
Only nine ITEP applications have been completely rejected by all the local taxing bodies that now have a vote, the report said.
The report also notes the future of the ITEP program is uncertain, as the executive order made by Edwards is “vulnerable to evisceration or reversal by a future governor.”
Editor's note: This story has been updated to reflect that the analysis found local governments got $282 million in additional tax revenue in 2021, and $760 million from 2016-2021.