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BRIGGS: Oil And Gas Industry Reviewing Governor’s Tax Plan

BRIGGS: Oil And Gas Industry Reviewing Governor’s Tax Plan
January 30
16:05 2013

Louisiana is experiencing economic prosperity at a time when many other states are still recovering from the deepest recession since the Great Depression. Contributing factors for this success can be linked to a business friendly environment and a determined workforce. Several industries in the state are thriving such as oil and gas, manufacturing and the chemical industry to name but a few. A common thread for these industries’ success can be linked to the shale revolution that is positively affecting the entire country.

Numerous multi-billion dollar projects are popping up around the state; largely in part to the abundant natural resources that Louisiana is privileged to have beneath feet. Dr. David Dismukes, a Ph.D. at the Center for Energy Studies at LSU, released a study recently with specific numbers about the future of our state. He said that the “abundance of natural gas resources has led to a virtual manufacturing renaissance in Louisiana where, to date, some $62.3 billion in new capital investments have been announced.” Dismukes goes on to say that resulting from the natural gas induced projects, over 214,000 thousand jobs and more than 9 billion dollars in increase wages will likely result over a 9-year period.

Governor Jindal is proposing to eliminate Louisiana’s income and corporate taxes and pay for those cuts with increased sales taxes, the governor’s office confirmed recently, thus making his plan revenue neutral for the state. The governor’s office has not yet provided further details of the plan. Historically, when a tax/s is removed, something else must be added or increased to compensate. The current sales tax rate of 4% would likely increase along with expanding the number of taxpayers. The oil and gas industry particularly could see an increase in taxes with regard to services.

Also on the table for removal would be tax exemptions. At the moment, there are around 468 tax exemptions, as was recently noted at the Revenue Estimating Conference (REC). The oil and gas industry has around 23 tax exemptions that help create new business for the state, and also retain business that is already deeply rooted in the Louisiana economy.

Of the 23 aforementioned oil and gas exemptions, each incentive is vitally important to the health of the industry. However, the Jindal administration has tasked the oil and gas industry with outlining the importance of all 23 exemptions, while highlighting the specific exemptions that the industry must retain in order to operate in Louisiana.

Thus far, states around the country that do not have a state income tax are experiencing economic prosperity. While Louisiana is already feeling economic success, it will be vitally important that the appropriate tax exemptions and incentives are kept to ensure a flourishing future for the days ahead. To guarantee a healthy environment, specifically for the oil and gas industry, the old theory of “fixing something that is not broken” will have to be thoroughly examined. Many opinions exist about this new tax proposal from the Governor, but thankfully all parties agree that for a lucrative business environment to endure, Louisiana must remain competitive with other energy producing states.

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5 Comments

  1. Laura O'Halloran
    Laura O'Halloran January 30, 22:51

    When I first heard the news of Gov. Jindal's plan, I was so excited I had chest pains for three days! Being completely exempt from all state income-based taxes, I am confident that Louisiana will do quite well. How the Governor handles the sales tax while keeping the state off our property will make or break the deal. If it is the 1.6% increase in sales tax as I presume, I'd say he is spot on and Louisiana will become this country's job haven while our exports increase by at least 10%. Oil and Gas, the movie industry, tourism, etc. will be a boom! Look for other industries to set up shop in Louisiana.

    • Gifford Briggs
      Gifford Briggs January 31, 16:43

      Just remember to get to 1.6% every business exemption and incentive would have to be repealed AND a major increase in the sales tax base… not saying it cant be done.. but someone will foot the bill

    • Nicholas Bouterie
      Nicholas Bouterie January 31, 16:49

      Better than taxing people for their work and production. I would like to see us "swap" responsibilities, though, with the elimination of income taxes. Do things like reduce homestead exemption to $10k and allow local governments to increase local sales taxes (with a vote of the people). Stop funding so many local needs/wants at the state level.

      De-centralize similar to Texas.

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