Tax Breaks Eyed for Bridging the Budget Gap
Since it’s an election year, it’s highly unlikely that lawmakers will risk the wrath of voters or the governor by raising taxes to fill Louisiana’s $1.6-billion budget hole. But they will almost certainly be taking a hard look at state tax breaks to bridge the budget gap.
Even state Economic Development Secretary Stephen Moret says it’s time.
“There’s $7-billion per year of tax exemptions in our state,” Moret says, “And some of them are broken. There’s just no other way to say it.”
Moret offers one example: the Enterprise Zone program. It allows companies building new facilities to reduce their property and corporate income taxes for up to ten years, as long as they take at least five people off the unemployment rolls.
“The Enterprise Zone program is available for retail projects, restaurants, hotels and so forth. So a lot of times you’ve got a state incentive that is going to an out-of-state company that is coming in to compete with existing Louisiana small businesses,” Moret explains, adding, “I don’t think that makes sense.”
In other words, companies like Walmart, Home Depot and Hooters get the bulk of these tax breaks.
Louisiana Budget Project director Jan Moller says many of the programs end up being nothing more than tax giveaways.
“In many cases it is direct spending that we do out of the state Treasury, and we just call it a ‘tax credit’,” Moller states. He says the Film Tax Credit program is one of those big giveaways, and should be curtailed.
“We’re spending $250-300-million a year in direct subsidies to the film industry,” he asserts.
For example, each episode of A&E’s Duck Dynasty receives more than $300,000 in state tax credits—over $6-million last year.
“We’re not saying we should get rid of the film program,” Moller adds, “But at a bare minimum, there needs to be a cap on this program.”
More than 450 tax credit and incentive programs are on the state books, and the legislature has ordered a comprehensive study on Louisiana’s entire tax structure. That study is being overseen by LSU economist Jim Richardson, and it’s due to be delivered in March.
One option being considered by lawmakers is simply suspending all the tax breaks for one year—leaving the next legislature and governor to find a way down from the fiscal cliff.