ITEP, that sounds like some do nothing government program straight out of the halls of Congress. But in our state’s interest it is far from that.
When it comes to attracting business to Louisiana, the Industrial Tax exemption Program (ITEP) is one element of a fiscal penalty that Louisiana has to endure in order to try to be competitive with other states. Quite frankly, we have to assume this penalty because we have refused to give up on the big-government philosophy that hurts our businesses and makes our state unattractive to economic development. Historically much of our government-centric practices were paid for with easy money that flowed from petro-dollars. Even though the days of “a chicken in every pot” thinking built upon spending other people’s money are long gone, we still continue to convince ourselves that the Louisiana Hayride has not stopped.
For almost a hundred years our state has accepted phony economic nonsense that our leaders, in order to stay in power, have fomented. Simply put, we accept their line that we will somehow break out of last place amongst our peer states if only we double down on the policies that have depressed us in the first place. Call it the welfare state or big government or both, it is all the same. When government attempts to supplant the individual then failure is sure to follow, and boy does Louisiana’s government philosophy replace the individual!
As I have written before, business survives based upon a simple maxim; in order to survive it must make a profit and keep as much as possible for its shareholders! When the economic climate turns against that principle, business simply ceases to exist or decamps to a place where it can thrive. In our state the metrics that businesses use to make decisions on whether to startup, to grow, or to relocate are all negative. They are so because of our big government philosophy laced with crony capitalism is a witches’ brew that we willingly buy in to but it is the antithesis of a growth economic climate.
ITEP and other incentives constitute our effort to offset the negative impact of our negative business climate. In effect, out of necessity, our state has been forced to grant financial incentives because we have been unwilling to correct our failures and to recognize that the solution to our socio-economic failures only resides within wealth-creating jobs created by business.
Like all financial incentives such as the ITEP program, there is short term negative impact upon local government revenues. This happens because ITEP abates property taxes equivalent to the value of the cost of an industry’s expansion for five years, extendable by a second five years. Despite a short term loss of local tax revenue, industrial expansion delivers to local government far more. Expansion brought on by ITEP not only directly creates local jobs but it also gives industry a reason to stay in a locale. All of this assures that the locale derives ever-growing taxes resulting from a generally stronger economy. Additionally, the future businesses who believe that they will dependably receive this incentive are far more likely to give serious consideration to a locale when making relocation/expansion decisions. In short the advantages have always outweighed the interim reduction in taxes.
The main drawback is that the basis for granting of an ITEP or an extension truly has been lax. The fix for that shortcoming is better enforcement by those who are authorized to oversee the program. However our governor has now gone a huge step further, in effect throwing the baby out with the bathwater. By conceding to the social welfare lobby along with some unions and some local governments, the governor has given the ultimate veto power over the granting of an ITEP or an extension to local government at many levels.
So why is that not just good government? The problem is that local government is easily swayed by vocal groups that promote “social justice” or by public unions who use the image of good government as a foil to look for more money for their members. These groups, politically powerful at the local level, are not concerned about the economic viability of the locale; their image of business is as a source of funds to pay for their special interests. It is this short-sighted attitude that is so contrary to the well-accepted principle that government should be limited to creating a viable economic climate in order to create private market jobs from which reasonable government revenues flow.
In effect, those that the governor have acceded to are the very core of our people who have long demanded those very same policies that have caused us to be in last place in so many socio-economic measures. And through his unilateral action our governor has empowered these anti-economic freedom types by granting them unfettered power over business growth and with it, growth dependent local economies. This power that will surely lead to disaster if unchecked.
Want proof? Just read the manifesto published recently by Together Louisiana promoting ever more government growth at the expense of business. Want more proof? Together Louisiana has filed suit against Ascension Parish because this government body agreed to grant ITEPs to growing industries. By his sole action our governor has unleashed the forces of anti-capitalism upon the very lifeblood that supports so many local economies and jobs for our people.
Just think of what a business who may want to move to or grow in Ascension Parish must be thinking? Let me guess; “If we want to move there we will be immersed in local politics and/or litigation from all kinds of groups. Worse, in order to get state support to expand or move we may be solicited by local politicians, bureaucrats, or those who use the courts to strong-arm business for payoffs or a whole host of other unethical things.” All of these bad outcomes are courtesy of our governor’s edict, an edict like so many others of his that comes without legislative input.
I actually believe that tightening the oversight over ITEP would be appropriate. But what gives me great pause is that because of the governor’s unilateral decision, extremists, for some cause that only makes sense to them, will now be able to block economic growth. And such growth offers the only hope of prosperity for our people. Add to this I also have great concern that the governor’s unilateral decision will open the door for corruption on a massive scale.
Local government needs to be granted the power to raise local funds locally. But that change must be accomplished concurrent with a full revision of the relationship between the state and local government. The incremental process that our governor has undertaken will no doubt ingratiate him to social extremists, unions, and some local government leaders, but it certainly will just add another reason that business will think twice about coming to Louisiana. Instead of trying to fix what is wrong with our business climate, he has gone to the opposite extreme by taking away one of our major tools in our ability to attract business.
The people of Louisiana have to recognize that business votes with its feet and forcing business to be exposed to local politics at its basest will assure that business will not be here to create the jobs that we desperately need. Sadly unilateral policy decisions such as this really should not be a surprise. We are a state whose leaders just don’t understand that “It’s the economy stupid” and so we should not expect anything other than such bad decisions until we demand a state where prosperity rules and government is only here to facilitate it.