Louisiana, through an un-elected, largely unaccountable board called the Commerce & Industry Board, is forgiving roughly $16.7 billion in local governments’ property tax revenue — all in the name of job creation — for a cost of about $535,000 per job created. The kicker: local governments have no say in the matter.
That’s the jarring conclusion of a new study, “Costly and Unusual,” released this week by Together Louisiana, a consortium of more than 250 civic groups and religious congregations that largely focuses on issues such as tax fairness, workforce development, criminal justice reform and access to health care and food for the poor and working poor.
Through a program called the Industrial Tax Exemption, manufacturing companies are eligible for a 100 percent exemption of local property taxes on the value of new investment: for expanding a facility, for example, or even routine replacement of machinery and other equipment. The exemption lasts 10 years in two five-year increments. The idea — supply side economics in its DNA — is that the Industrial Tax Exemption encourages businesses to expand operations, thereby creating good-paying jobs in the process. It works to an extent, but the return on investment suggests its a scam — one that exploded in the trickle-down fever of the Bobby Jindal years.
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Here in Lafayette Parish, according to the study, there are $47.1 million in corporate property that is currently exempt from taxes due to the subsidies, resulting in a corresponding $4.7 million in lost revenue that would otherwise go to our schools, law enforcement, infrastructure and other needs.
Of that $4.7 million in lost revenue, the study estimates, the lion’s share — $1.9 million — would go the school system while $1.25 million would otherwise go to public safety such as police, the sheriff’s office and the parish jail.
But where the taxpayer bamboozle is most readily apparent — where the idea that cutting taxes on the rich and subsidizing corporations because those tax cuts and subsidies will “trickle down” in the form of jobs and prosperity should have long ago been discredited — is in the return we taxpayers get on these subsidies, i.e., job creation. Together Louisiana’s study finds that the $16.7 billion in subsidies the state has provided to corporations for locating in Louisiana or for expanding their operations here over a decade have created about 31,000 jobs for a taxpayer-supported total of $535,343 in lost property tax revenue per job created. Let's say that another way: Each job created through the Industrial Tax Exemption cost Louisiana taxpayers $535,000.
And here’s the rub: One of the poorest, least healthy, most dependent on the federal government (red) states in the nation, Louisiana, far and away forgives more corporate property-tax revenue per capita than any other state — nearly twice as much per capita as the next closest state, New Mexico.
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According to Together Louisiana’s report, the Commerce & Industry Board has no process of evaluating the return on investment from these subsidies and conducts no assessment of whether these corporate expansions and investments would have occurred without the subsidies. Similar programs in most other states exempt school boards from the subsidies. Not so in Louisiana, where public school districts across the state are deprived of precious tax revenue even as the current economic malaise occasioned by low oil prices drives down sales tax collections. Even some red states like Alabama require local approval of corporate tax abatement. Could Lafayette use the $4.7 million it’s giving away annually through the Industrial Tax Exemption? Oh, you betcha!
So as the Louisiana Association of Business and Industry clutches its pearls and stays close to its fainting couch over some recent sensible reform to commercial tax programs, remember that Louisiana this year paid our more in tax credits and rebates to corporations than it collected, according to the Department of Revenue. Supply side/trickle down economics is the pernicious lie that has helped bankrupt Louisiana — and Kansas! — and needs to be fixed before we all choke on Ronald Reagan’s jelly beans and Ayn Rand’s cigarette smoke.
See the full version of “Costly and Unusual” by clicking here.