Friday, December 5, 2014

Friday, December 5, 2014

Little-known inventory tax credit rising in cost, redistributing wealth; About those insurance premiums…; and Student loan debt piling on Louisianans

 

Little-known inventory tax credit rising in cost, redistributing wealth

In the sixth installment of its stellar “Giving Away Louisiana” series, The Advocate tackles the little known–yet very expensive–inventory tax credit, which cost taxpayers $427 million in lost revenue last year and has been growing at a rapid pace. The inventory credit is action is a roundabout way to send state dollars to parish and other local governments. Gordon Russell explains how it works:

 

Every year, the oil refiner Motiva Enterprises writes a check for $6.6 million to St. James Parish.

A couple of months later, the state of Louisiana sends the company a full refund. This messy system was created a generation ago in order to wipe away an obscure property tax that is assessed by parish governments against “business inventory” held by companies in Louisiana. In the case of Motiva, a joint venture between oil giants Shell and Aramco, the huge tax bill from local government is mostly a function of the oil stored at its refinery in Convent. While many, if not most, Louisianians probably have never heard of the business inventory tax, it’s a big deal for some businesses, as well as some parishes. In industry-heavy St. James Parish, it accounts for nearly half the property tax base and about 17 percent of all tax collections.

 

What makes the program suspect is its rapid growth–120 percent in seven years–which suggests that it is being gamed by businesses and local governments at the expense of the state budget. Worse, the state provides no oversight.

 

That system put the state in the awkward position of having no say or control over the size of the bill it gets each year. And it could give local assessors an incentive to overappraise inventory — or assess property as inventory rather than in another category, such as movable property — knowing companies don’t really mind paying it because of the refund.

 

The program’s design also raises questions of fairness, as taxpayers in less developed parishes are subsidizing industry-heavy (i.e. more prosperous) parishes, mostly in the petrochemical corridor in south Louisiana.

 

“Usually when the state becomes the middleman, such as with school funding, it is to smooth out the disparities among the parishes in local wealth and revenue sources,” [PAR director Robert Travis] Scott said. “But in this case, it’s doing the opposite.”

 

About those insurance premiums…

Despite months of hoopla and hollering from opponents of the Affordable Care Act that premiums in the new marketplace were “skyrocketing” by “double digits,” a new analysis of the actual plan offerings show that premiums for the law’s “benchmark” plan are only going up 2 percent in Louisiana next year, the Advocate reports. The paper also notes that prior to the Affordable Care Act, people who buy health coverage through the individual market often did see double-digit increases, suggesting that the law has made the market far more stable for Louisiana’s families.

 

Families are also able to get tax credits through the new marketplace to help keep plans affordable, and 88 percent of buyers received credits this year. According to the U.S. Department of Health and Human Services, the benchmark plan for a single 27-year old adult will cost $257 a month before tax credits, while a plan for a family of four will cost $932 a month without credits. However, once credits are factored in, a family making $60,000 can expect to pay only $407 a month, for example. Tax credits are adjusted for income, and consumers can choose to buy more or less expensive plans.

 

Student loan debt piling on Louisianans

Between 2008 and 2012, student loans for Louisianans at public colleges and universities increased 47 percent. According to a new report from the Center for American Progress, that means students took out an average of $1,017 more in loans. The report draws a clear line between the higher student debt and the fact that states have been rapidly slashing their investments in higher education. In response to the recession and  chronic budget shortfalls–made worse by the rising cost of tax exemptions–Louisiana has cut at least $700 million from higher education, while tuition at most schools has gone up 10 percent every year. There is clear correlation between the share of workers with a bachelor’s degree and median wages, which sadly makes it not surprising that Louisiana has the 5th least share of workers with the credential and the 3rd highest poverty rate.

 

Number of the Day:

$427 million — Cost of the inventory tax credit to state taxpayers, up 120 percent compared to seven years ago (Source: The Advocate)