New York Times Series Shines Spotlight on Business Tax Breaks

By Steve Spires

As Louisiana policymakers continue to review the state’s tax exemption budget, the New York Times began an in-depth series of articles on Sunday looking at the national trend of states trying to use tax breaks and subsidies to lure businesses away from their neighbors. It’s a remarkably detailed look at the vast sums of taxpayer money states are spending to attract companies and jobs, and the underwhelming returns on these investments.

The Times found that Louisiana spends at least $1.79 billion a year on corporate subsidies and incentive programs at the state and local level, which comes to $394 for every man, woman and child in the state. And that’s a low-ball figure, as it only includes state tax incentive programs and local incentives—usually property tax forgiveness—that fall under the umbrella of “economic development.” It excludes many other tax exemptions, deductions or credits that also benefit corporations and are often touted as economic development initiatives.

Many of the recipients of the largest tax incentives are major international corporations that are highly profitable. Unfortunately, while the incentives can be large, accountability measures are often weak or non-existent. With few strings attached and limited reporting, most states really don’t know the true cost or benefits of their incentive programs.

You can view a searchable database of who received Louisiana’s incentives on the New York Times website here.

LBP’s analysis of Louisiana’s tax exemptions found that the cost of “tax incentives and exemption contracts” administered by the Department of Economic Development climbed from $59 million in 2001 to nearly $400 million a decade later—a 573 percent increase even when adjusted for inflation. This came at a time when the state general fund shrank  on an inflation-adjusted basis.

This matters because less revenue means more cuts to education, health care and infrastructure—the tried and true building blocks of a strong economy. Because Louisiana (and almost every other state) is constitutionally required to have a balanced budget, a tax break or incentive package for a corporation must be “paid for” with budget cuts or tax hikes on someone else.

As tax revenues have fallen over the last four years, Louisiana has responded with a cuts-only approach that has produced deep cuts to K-12 and higher education at a time when we know that having a highly-educated workforce is the key to success in the 21st century economy. Education programs make up a significant part of the state budget, meaning that when revenues fall short, they are almost certain to face the deepest cuts.

Louisiana’s investment in its children’s future through the public-school funding formula has been flat for four years, even though the cost of educating a child has increased. This has resulted in real cuts to local school districts. The story is worse in higher education, where declining state support, tuition spikes and no increases in need-based aid are having a real and negative impact. As The Advocate reported recently, lack of state funding and support is causing a “brain drain” of top talent at Louisiana’s colleges and universities, which often means the loss of research dollars too.

Yet instead on looking for a way to reverse these damaging trends, Louisiana continues to create new incentive programs that often fail to produce the positive economic results that are promised.

As Hallmark CEO Donald Hall Jr., told the Times: “If you’re looking at the competitiveness of a region, the most important thing a region can do is to focus on education. And this use of incentives is really transferring money from education to businesses.”

Those are important words for Louisiana policymakers to keep in mind as they begin the critical work of restructuring the state’s tax structure.

They include details about safety-net programs like Medicaid, tax credits for low-income workers and educational scholarships and help promote a better understanding of how safety-net programs affect different communities across our state.
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