Louisiana shifts tone on tax breaks for business
BATON ROUGE - After years of generosity with tax breaks and subsidies, Louisiana’s leaders are taking a new approach with business, responding to years of budget problems with scaled back support for companies and questions about the value of such investments.
Gov. John Bel Edwards said he wants to make sure Louisiana’s limited tax dollars are spent wisely, focused on investment returns rather than giveaways. State lawmakers in some instances have been harsher, suggesting companies have siphoned billions from the state treasury and are too greedy to give anything back amid difficult financial times.
Business leaders say the decision-making — and even just the rhetoric — could chase away big-dollar investments from the state at a time when Louisiana is grappling with what one state economist has described as a recession.
But after 20 years of state government often conceding to the wants of business and industry, the tone has clearly shifted in Baton Rouge.
The most recent blow to business will impact large manufacturing facilities, mainly chemical plants. Edwards announced this month he is changing the rules for a lucrative property tax break program that strips hundreds of millions from local government coffers.
New and expanding manufacturing facilities are allowed an exemption from paying property taxes for up to 10 years through the Industrial Tax Exemption Program.
Edwards issued an executive order saying the tax exemptions will be favored for new manufacturing facilities and additions to existing plants will face a tougher ride to get his approval. Tax break recipients will have to enter into contracts allowing the state to cut or remove the exemption if job provisions aren’t met.
“If we’re not creating or retaining jobs, then there is no rationale for this program,” the Democratic governor said.
Dan Borne, president of the Louisiana Chemical Association, said Edwards’ order will cause uncertainty and could put projects “on pause” while facilities determine the impact.
“The governor’s plan will undoubtedly disincentivize private sector investment at a time when the state is already in an economic recession,” said the Louisiana Association of Business and Industry, known as LABI.
Edwards said the new criteria weren’t aimed at stifling business development and the state would remain competitive and “generous.”
With the state struggling through its worst financial troubles in three decades, Edwards is taking a less giving approach with businesses than the treatment they received from former Govs. Mike Foster, Kathleen Blanco and Bobby Jindal.
Edwards’ predecessors agreed to tax breaks benefiting companies and millions, if not billions, in subsidies to attract business. But even Jindal shifted his approach in the final year of his term as budget problems overwhelmed his administration.
In the last two years, business tax breaks have been scaled back and corporate tax laws changed, trying to get companies to pony up more for the state budget.
In 2015, then-Revenue Secretary Tim Barfield said his agency found only about one-fourth of the state’s largest companies were paying corporate income taxes to Louisiana, with the others using tax avoidance options and tax breaks to keep from owing anything.
Louisiana has collected only $50.4 million in total corporate income and franchise taxes for 11 months of the 2015-16 budget year that ended in June, according to revenue department data. Meanwhile, more than $1.4 billion in corporate income and franchise tax breaks were expected to be given for the year.
Business groups say the data doesn’t reflect the full scale of business taxes because smaller companies pay their taxes on individual income tax returns.
But those kinds of findings have irritated many lawmakers.
“People are tired of corporate exemptions, rebates and exclusions. They want it to be fair,” Sen. Jay Luneau, D-Alexandria, said during one recent tax hearing.
LABI President Stephen Waguespack told senators industry has been hit with higher tax bills to help bail out the budget.
“We are doing our part to help address this challenge,” Waguespack said. But he added: “The private sector economy is hurting.”
Expect the tension between balancing the budget and helping business to continue as Edwards and lawmakers look to a 2017 legislative session focused on rewriting state tax laws.