The Baton Rouge Advocate last December ran an excellent eight-part series on Giving Away Louisiana in which the paper examined inventory tax rebates, movie tax credits, Enterprise Zone tax credits, solar energy subsidies, fracking incentives and the state’s 10-year property tax exemptions, all of which combine to gut the state treasury of billions of dollars in tax revenue.
We took a little different approach.
Sometimes all one has to do to illustrate the folly of Louisiana’s corporate tax exemptions and tax credits is do the math.
The theory in Baton Rouge is that such tax breaks create jobs which in turn produce taxes for the state coffers through consumer spending and state income taxes, thus making the exemptions and credits a win-win for everyone concerned.
Take the five-year tax credit awarded in 2013 to Lakeview Regional Medical Center in St. Tammany Parish for an upgrade to its hospital facilities, for example. In exchange for the creation of five new jobs with a new five-year payroll of $1 million, Lakeview was awarded $330,000 in Enterprise Zone tax credits. (A tax credit is a dollar for dollar reduction of a tax liability meaning a $1 tax credit reduces one’s taxes by a full dollar.)
Broken down, that comes to $200,000 per year in new payroll, or an average of $40,000 per new employee per year against a tax credit of $66,000 per year.
At Louisiana’s 4 percent tax rate for that income bracket for a family of three, that means the state will rake in $4,000 per year total for all five employees ($800 each). http://www.tax-brackets.org/louisianataxtable
For a single employee, the state income tax revenue increases to $5,650 for all five employees ($1,130 each), still a far cry from the $66,000 per year in tax credits awarded to the hospital.
Obviously, the new employees will spend money locally which will generate local and state sales tax revenues, but it will take a lot of income and sales taxes from five employees to make up for the loss of $66,000 per year over that five-year period.
Louisiana, meanwhile continues to offer inducements to business and industry that defy logic—projects like the $152,000 Enterprise Zone five-year tax credit for Wal-Mart. Enterprise Zone credits are awarded ostensibly for businesses to locate in areas of high unemployment.
This Wal-Mart, however, was built in St. Tammany Parish, one of the most affluent areas of the state. And Wal-Mart pays low wages, has been cutting back on offering medical benefits for its employees and last March, the EEOC filed a an age and disability discrimination lawsuit against Wal-Mart stores in Texas.
In this case, the total five-year payroll for the 65 new jobs created by the new Wal-Mart was $2.78 million, or about $8,550 per year per employee. The federal poverty level for a single person is $11,670 per year and $19,790 for a family of three. That means the typical Wal-Mart employee in Louisiana is eligible for food stamps and Medicare/Medicaid–at state expense. The 2014 That salary for a family of three produces a state income tax of $21 ($41 for a married person with no children or $61 for a single employee claiming only him/herself).
The total taxes owed, depending on marital status and number of dependents, would range from $1,365 to $3,965 for all 65 employees, or between $6,825 and $19,825 for the five years of the Enterprise Zone tax credit—a far cry from the $152,000 tax credit awarded Wal-Mart.
In 2013 alone, Entergy, the electric-utility holding company with total assets of $43.4 billion and which provides electricity throughout south Louisiana and parts of Arkansas, Mississippi and Texas, received 21 separate 10-year property tax exemptions totaling $115 million while creating….not a single new job.
Entergy CEO J. Wayne Leonard received $27.3 million in compensation in 2009 and that same year, Entergy directors awarded him an additional $15,871 to pay part of his 2008 federal income taxes. The question here might be: how many Entergy employees did the directors help with their federal income taxes?
All this from a company that, after independent audits of charges, had to refund nearly $3.4 million to the New Orleans Sewer and Water Board in 1992 ($1 million), the City of New Orleans in 1993 and 1994 ($2.2 million), the New Orleans Superdome Mall ($70,000) and LSU ($90,000).
While state income taxes are not the only barometer in calculating the impact of corporate tax breaks (state and local sales taxes paid by those employed as a result of the incentives, for example, would add to the equation), but just taking state income taxes for a typical family of three or four, this what LouisianaVoice found:
- The state gave 10-year Quality Job payroll rebates of an estimated $40.85 million in 2013 against projects creating 1,357 new jobs with a combined new 10-year payroll of $680.85 million. That comes out to an average salary of $49,700 per year. For an employee married, filing jointly and with 3 exemptions (including him/herself) that comes to an average state income tax of $1,008 per year—or a 10-year total of $13.7 million total for all 1,357 employees. So, the state collects somewhere between $13.7 million and $20.6 million (depending on marital status and dependents) against payroll rebates of $40.85 million over 10 years—a net loss to the state of about $20 million.
- The state gave five-year Enterprise Zone tax credits totaling $19.6 million during 2013 for projects producing 4,857 new jobs with a combined five-year, new job payroll of $658.3 million, an annual average salary of only $26,900—an average state income tax liability of $400 per employee which, over a five-year period, produces about $9.7 million to $10 million in state income taxes—against tax credits of $19.6 million, or a net loss of $9.6 million to $9.9 million to the state over the five year life of the tax credit.
- But the real kicker is the 10-year property tax exemption of $790 million in 2013. For that, 3,696 new jobs were created with a new 10-year payroll of $1.84 billion, or about $184 million per year, which comes out to $49,780 per new employee per year. That salary would produce an average state income tax liability of about $1,200 per year per new employee, or about $44.4 million over 10 years, a loss to the state of more than $750 million over 10 years. By these calculations, it would take something like 17.5 years of state income taxes from these 3,696 employees to make up for the $790 million in lost property taxes.
These three programs combined for a net loss to the state of about $80 million per year just in state income and property taxes. And that doesn’t even include the movie and TV credits or tax abatements, the inventory tax rebates, and the other incentives. So, since Jindal has been in office, the state has given away well over $5 billion dollars in Enterprise Zone, Quality Jobs, and 10-year property tax exemption programs without coming anywhere near recovering that amount in individual taxes paid by employees of those corporations who nevertheless are called upon to shoulder a disproportionate share of the cost of government not borne by their employers.
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Excellent analysis of the fallacy of the highly touted “trickle down” economics of the Laffer Curve.. Excellent. You have explained and proven in a way that even our Legislators (well, at least some of them) can comprehend why these tax incentives will never enhance state coffers and will in fact deplete them. And this goes regardless of how anyone tries to apply multiplier effects to the justification.
And the idea of Wal-Mart being awarded tax incentives to pay far below poverty level wages is abominable. We, the taxpayers, pay for the food stamps, medical care, housing allowances and a myriad of other subsidies in order that these “working poor” can survive. And all while the selfish Walton heirs horde their wealth and do virtually nothing to benefit the very nation that made their wealth possible. If one really believes that the closely held “mom and pop” businesses are the backbone of the American Capitalistic system, then we should be making oligarchies like Wal-Mart less profitable so that the “mom and pop” stores can continue to compete rather than be forced to close..
The Waltons, the Koch brothers and other bazillionaires are actively subverting our representative republic through humongous campaign contributions and hordes of lobbyists. As one example of their success, their corporate and personal tax rates on millions and billions of annual income are now often less than that of the average middle class taxpayer.
Laffer didn’t say that revenues would always increase if you lowered taxes. The idea is that revenue would increase as the economy grew, *IF* the taxes had been so high as to have held the economy back.
In Jindal’s giveaways, he’s proven that taxes weren’t holding the economy down, so Jindal has just been busy wrecking state services.
Once again, Tom, you confirm that the Louisiana economic miracle is that the state has given away so much and gotten so little.
It should be abundantly clear, even for most Republicans in the legislature, that Jindal has only done what he thinks is best for his Presidential aspirations and not fulfilled his responsibilities to the residents of Louisiana. The legislature needs to revolt and raise enough revenue from businesses to actually balance the budget and reverse the OGB changes that are so abusive to state employees and teachers. And then legislators need to have the resolve to override Jindal’s ensuing vetoes.
Other legislation should require the Louisiana Department of Economic Development (LED) to (1) document what the state will receive each year of a 5 or 10 year tax exemption period, or other incentive. (2) LED should justify the incentive based on these benefits and documentation of what the state will lose if the incentive is not provided. (3) The analysis should show that state government will more than recover its investment. Benefits to parish and local government entities may be mentioned but should not be part of the justifying analysis. The state needs to at least get its money back! (4) The Legislative Fiscal Office should review each analysis for reasonableness. (5) Each incentive should include a provision to cancel/reclaim the incentives if the benefits used in the justification are not realized.
Excellent comment on Tom’s excellent point. These incentives are among the elephants in the living room of our budget. Another elephant being ignored is the cost/benefit to the state of privatization of state services. Concrete proof of the positive effects of either of these is absent. Upfront projections of the benefits often contain analyses so arcane and/or ephemeral as to have no value and any follow-up to determine actual costs/benefits, if done, is kept secret. – The public, as well as responsible people inside government are kept almost entirely in the dark from beginning through implementation.
This state has had a structural budget deficit every single year of this administration. The fact Moody’s is just now acknowledging it says very little for their credibility. We already pay exorbitant bond insurance to get decent interest rates. Imagine how much this is going to go up now that the Wall Street rating agencies are finally acknowledging reality.
Moody’s Investment Services is now saying that Louisiana’s budget is so screwed up that it has a structural defecit. It’s almost as if they’re comparing Louisiana to a failing Third World country, and they are now considering lowering the state’s credit rating.
Apparently, paying people huge sums of money only gets you loyalty and not competence. Eh, Bobby?
http://m.wdsu.com/news/credit-agency-says-louisiana-budget-has-structural-deficit/31059304
Flagrant, glaring, obvious, undisguised, unconcealed, open; shameless, barefaced, naked, unabashed, unashamed, unblushing, brazen folie de grandeur, thirst/lust for power; self-importance, egotism, conceit. Jindal.
The Moody’s Investment Services development should wake us all up.
We need to start heeding John Kennedy’s warnings in this regard. He has said many times what Moody’s is now reporting: WE HAVE A STRUCTURAL DEFICIT PROBLEM.
And this Adminstration has cultivated it for its own political reasons rather than in any way trying to fix it.
Hey, hey, hey! You guys speak of Jindal as if he were the Immaculate and Immortal Leader of North Korea. Do you think he sits on his throne and says “do this” and “do that?” We have an elected branch that is not doing the job the people sent them to BR to do. I can’t stand Jindal and I’m starting to not like a lot of legislators who continually put off making hard decisions on the budget. And, don’t go to Wal Mart if you do not agree with their payscales.
I agree. And I do NOT go to Wal-Mart under any circumstances. It is sometimes a tad bit inconvenient to go elsewhere, but I’ve found places to provide for all of my previously Wal-Mart purchased goods. And when compared to Wal-Mart advertised prices (I look just to see how I’m doing), competitors prices are very comparable. Wal-Mart does NOT lead with low prices. Rather, they follow so as to barely undercut local merchant prices. They are bullys.
Each candidate (except one whom The Advocate didn’t identify) for governor says he’ll call a special session to deal with the budget problem. That is NOT what’s needed. What’s needed is a Constitutional Convention that rewrites our constitution to make us more like other states and reclaim the Huey Long era of power bestowed upon the governor. People complain about the Legislature, but the problem is far too much power is bestowed to the governor in Louisiana. If a convention were convened to fix that problem permanently, then at least we would all owe a debt of thanks to Jindal for exposing the exploitation possible by someone so blinded by his own political aspirations.
Robert, I respectfully disagree with the premise that the Louisiana governor has inordinate power under the state constitution and/or statutes. He has veto power, for example, but the legislature has the power to override vetoes and it has what is arguably the greatest of all powers, that of appropriation. The legislature, in varying degrees, cedes its powers to the governor. It does so for a number of reasons, not the least of which is the ability to make the governor its scapegoat when things go wrong. By the same token, IF the legislature shows independence and makes a wrong move, the governor is able to use it as his/her scapegoat.
I have direct experience upon which I base my disagreement. I became state budget director during one of those rare eras when the legislature exercised substantial independence. I can assure you Governor Roemer did not get the kind of blind allegiance and support we see today and the constitution nor the statutes have changed significantly to grant the governor more substantial powers.
We eventually reached the point where everything the administration tried to do was met with legislative resistance. They sensed blood in the water, acquired newfound courage, and seized on the opportunity to attack and appear strong. Whether the state was ultimately better off is a matter of debate, but when EWE was elected again, the legislature returned to its former subservience so we’ll never really know.
The Roemer administration made hard and unpopular proposals and choices at a time when we faced a fiscal crisis greater than today’s. Although the magnitude of the structural deficit was about the same, dollar wise, we also suffered from the inability to pay day-to-day bills because we had no cash. The legislature reversed many of the cuts we made in recurring expenses and forced the use of one-time money to do so. This made them look good in the eyes of their constituents and state agencies, but was it the right way to do things? Is this not the same thing it goes along with today?
We may very well need a new constitution, but as long as our legislature chooses to behave as it does, no law is going to change it.
You may be right, Stephen, but I’ve heard all my life (including Louisiana history classes and civics classes) that Louisiana’s governor has WAY, WAY more power than any other governor in the nation. I think the proof of that is Vitter being willing to take a demotion because he wants to leave a body where he’s only one in a hundred and become an authoritian leader with immense power and the ability to get his initiatives passed (whereas now his own Republican colleague Senators often view him in a distasteful manner). Also, when William Daniel was my representative, this is what he said to me (when Foster was Governor): “Robert, Gov. Foster will introduce a bill that lands with a dud and is DOA with the Legislature. Then he starts walking the isles of the chambers and will lean over to a representative or senator and say, ‘It is important to you to get that bridge funded over the river running through your district, isn’t it?’ and the next thing you know, something that was DOA passes both chambers by a wide margin.
Whatever is required to fix that kind of thing (assuming it is fixable) is what has got to happen or we’ll just stay in the mess we’re in.
Now, I see La. Ed. Watcher says something like I suggested is a mantra of Libertarians. Well, I am a registered Libertarian, and I’m happier in the 2 1/2 years I’ve been in that party than the 28 years I was a Republican.
I know the next sentence I’m about to write is going to cause readers to want to assail me with a vengeance, so you’ve been forewarned. If the election were held today for Governor, I would pull the lever for Sen. David Vitter. There’s no such thing as a perfect candidate, and Vitter is not nearly as “in your face” as he once was, but I see him as the best hope for ridding this state of useless boards and commissions and, yes, that is a central plank in the Koch brothers’ agenda, and I admire their stand on that issue. I’ve asked each candidate where they stand on that issue at BRPC meetings (except Angelle who has yet to be invited to address the PC), and Vitter gave the most supportive response.
Although since registering Libertarian, I’m now a passive member of SmallBizRepublicans instead of an active member, I continue to provide them with videos on how these candidates respond to those type questions. Feel free to watch the first video on this webpage to see how important this issue is to us: http://www.abolish-idb.com/institute_justice3.htm. My point is that we do represent a fairly size able voting block, and we tend to vote in near-unison. Find us a candidate receptive to ridding Louisiana of its many useless boards and commissions, and we’ll line up in support. Right now, we feel Vitter gives us our best shot. Sorry to disappoint so many LA Voice readers with divulging whom I would support at this time, but one of the beauties of Tom’s blog is that we’re not all obligated to have the same opinions on various matters, and I know I’m in the EXTREME minority for my (at this point) support of Sen. Vitter.
Now let the arrows start flying my way 😊.
Among the very first of our projects when Governor Roemer took office (actually before he took office – EWE relinquished control early) was the eliminations of as many boards and commissions as possible. Look at where we are today. Just saying…
Stephen, in hindsight, I think many now view Gov. Roemer far more favorably than they did when he was in office. I was pretty young back then, but it seems he was ahead of his time (i.e. the electorate wasn’t ready for some of his bold initiatives). It’s a shame he couldn’t have a chance to try and implement them in today’s environment almost 30 years later. Roemer was DEFINITELY on the right track with getting rid of boards and commissions, and I can only wonder just how much better this state would be today if he had succeeded.
Also, I respectfully disagree that we need a Constitutional Convention, and I shudder at the thought of someone like Vitter pulling the strings on that one. I know that has become a popular mantra of Libertarians, Tea-Party and even some mainstream republicans, but you are just asking for trouble. Look at the big picture. Yes, they might get rid of some protections for certain funds, but they will also likely work to get rid of other protections that we like – for instance, the constitutional protection for state workers’ and teachers’ retirement. Be very careful when you ask for something like that – esp. if you assume that state leaders have anyone’s best interest at heart besides their own.
And, I agree with Stephen. The Legislature has the ability and authority to be the check in the “checks and balances” system of the 3-branch government. They’ve just been too busy hiding behind Swindal’s skirts hoping they could ride the good and blame him for the bad.
The Legislature may (technically) have the authority, but I think the argument is that a governor has such power over government, including the legislator and legislator’s careers, that he can prevent them from using their power. In other words, he has too much damn power.
Anyone who has worked in state government can give you many examples of Jindal’s use and abuse of cronies to shove destructive plans through. The damage he’s caused to the state is staggering.
lol: The governor can only prevent legislators from using their power if they let him. I guess you don’t believe the first-hand experience I have related above. That’s your prerogative.
How did Bobby Jindal become the governor of Louisiana?
He’s been involved in politics in Louisiana for years. He was a ‘whiz kid’ under one of our Governors for healthcare issues. His job was to gut the healthcare system in Louisiana and he’s pretty much accomplished that. He only struck the initial blow.
And this is the “now you see it” part; terrifying to imagine what’s going on in the “now you don’t” part of the trickster’s agenda.
http://theadvocate.com/news/11505636-123/politics-blog-bobby-jindal-vaccinations
Another brave and original stance by our governor.
People voted for this guy and the legislators who have gone along with his self serving plans. They’ve given the state away to the highest corporate bidder and the citizens are being left with nothing for what taxes they do pay. It’s kind of a situation like, “I saved thousands of dollars letting the roof leak, too bad the inside of the house is ruined from the leaks.” kind of thing. You get what you vote for and I don’t see any new candidates coming along with any really bold new plans to turn it around.
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