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Perverse incentive

Posted on December 18, 2017

The Industrial Tax Exemption Program doles out about $1 billion each year in property tax breaks to corporations. The program is supposed to provide a tax incentive to corporations looking to locate or expand their operations in Louisiana, a misguided approach from the outset. But state officials have been giving out the money willy-nilly, not accounting for the number of jobs lost or gained by a given project. Rebekah Allen explains in an in-depth report for The Advocate that state leaders regularly provided tax abatements for projects that lose jobs, along with projects required for environmental reasons and routine upkeep.

But as Exxon was getting subsidized to grow its footprint in and around Baton Rouge, its local employee count was shrinking. Louisiana shielded the massive energy company from more than a half-billion dollars in tax payments even as its local payroll was trimmed by almost 1,900 jobs — a cut of more than 40 percent. … “What’s the point of economic development if not to broaden your tax base and create job opportunities?” said Brian Eddington, general counsel for the Louisiana Assessors’ Association and former chief counsel of the Louisiana Tax Commission. “The problem is the (tax) base is not getting broadened and there’s really not any requirement that they create local jobs.”

Policy analysts of diverse viewpoints agree the program is wasting money.

Scott Drenkard, of the conservative-leaning Tax Foundation, said Louisiana appears to be giving massive tax breaks to companies that are likely to locate in Louisiana anyway. “Some of these things can only happen at the mouth of the Mississippi,” Drenkard said. “I’m really critical of programs that provide incentives for stuff that has to happen. There are a lot of opportunities in Louisiana because of its geographic position, and some of that has been squandered by these attempts to make deals with anybody who asks.”

Even though Gov. John Bel Edwards instituted some modest reforms, advocates say the program remains a boondoggle. Broderick Bagert of Together Louisiana explains:

“There’ve been no standards of accountability, no measures for appropriate decision-making, no appraisal by the department that even tries to justify or assess the outcomes of the program,” he said. “It’s the sloppiest public program our state has ever created.”

 

Poverty is not a crime

In Louisiana, where much of the judicial system is financed by fines and fees paid by criminal defendants, the line between freedom and incarceration often depends on a person’s financial resources. Poor people languish behind bars, while those who can afford to pay get released. But as the AP’s Kevin McGill details, several lawsuits winding their way through the system are aiming to change that:

One such suit was filed in New Orleans in 2015. Wednesday brought a major ruling in that case: U.S. District Judge Sarah Vance said the judges of the state criminal courts in Orleans Parish have a conflict of interest because they rely on fines and fees for court funding — raising legitimate concerns over whether the court’s financial needs might affect decisions on whether low-income defendants are able to pay. Alec Karakatsanis of the Civil Rights Corps, one of the groups that backed the lawsuit, called it a landmark ruling. “For a long time a lot of very poor people have been suffering flagrant violations of their constitutional rights and having money extorted out of them,” he said. Vance’s ruling is likely to affect other cases.

 

What the tax bill does

Michael R. Bloomberg, billionaire and former mayor of New York City contends that the tax bill being considered by Congress will not lead to meaningful wage gains or growth. And while Bloomberg is a proponent of revenue-neutral tax reform, he gives his insights on what the current plan will do:

It takes money away from schools and students.

It restricts our ability to invest in infrastructure.

It does nothing to boost real wages while making health insurance more expensive.

It makes it harder to control the costs of Medicare and Social Security without cutting defense and other spending — or further exploding the deficit.

 

Fr. Fred Kammer, director of Loyola University’s Jesuit Social Research Institute provides a moral case against the bill in a letter to The Advocate.

Secondly, the bill increases the regressiveness of the tax system, increasing taxes on low-and-moderate income individuals and families while delivering increased benefits to corporations and the wealthy. This will exacerbate the already egregious income and wealth inequity within our society. As the U.S. Catholic Bishops note in their letter of November 22 to the U.S. Senate: “Tax breaks for the financially secure, including millionaires and billionaires, should not be made possible by increased taxes to families struggling to meet their daily needs.”

 

Trump administration bans words from budget

State senator Sharon Hewitt of Slidell, introduced legislation in 2017 that establishes a pilot evidence-based budgeting process for adult mental health programs. The bill passed unanimously in Louisiana’s Senate and by a 91 – 5 margin in the House. But, it would not be welcome in President Donald Trump’s budget proposal. That’s because evidence-based is one of seven words banned from the budget document by The White House. Lena H. Sun and Juliet Eilperin report for The Washington Post.

Officials at the Centers for Disease Control and Prevention, which is part of HHS, were given a list of seven prohibited words or phrases during a meeting Thursday with senior CDC officials who oversee the budget. The words to avoid: “vulnerable,” “entitlement,” “diversity,” “transgender,” “fetus,” “evidence-based” and “science-based.”

 

Surging U.S. inequality due to policy choices

Christopher Ingraham reports for The Washington Post’s Wonkblog that policy choices in the United States are fanning the flames of mounting income inequality. Louisiana has the second-highest rate of income inequality among the states.

The 2018 World Inequality Report, written by a team of leading international economists including Thomas Piketty of “Capital in the Twenty-First Century” fame, finds that the rise of income inequality in the United States is “largely due to massive educational inequalities, combined with a tax system that grew less progressive despite a surge in top labor compensation since the 1980s, and in top capital incomes in the 2000s.” … The tax bill under consideration in Congress is likely to drive these disparities even wider, via a massive corporate tax cut and further reductions in the estate tax and the income-tax rate for millionaires.

 

Number of the Day

$13.7 billion – Lost tax revenue from the Industrial Tax Exemption Program from 2006 – 2016 (Source: Louisiana Tax Commission via The Advocate)

 

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