Tax Breaks Elusive Target

Louisiana state government loves to give away your tax dollars. The legislative auditor reported back in March that companies and individuals over a six-year period enjoyed $4.8 billion in tax breaks. 

Tax cuts are good for improving the business climate and helping individuals, but does the state get the best bang for its bucks? That’s hard to say because there are no stringent rules on the books for determining whether the returns come close to equaling or exceeding the tax breaks.

Movie tax credits are often cited as an example of a tax break that may not be producing the desired results. The Advocate reported a week ago on an analysis that showed motion picture production generated $27 million in state revenue in 2010 while receiving nearly $197 million in tax credits. That’s a return of $1 for every $7 movie-makers get in tax incentives.

Stephen Moret, secretary of the state Department of Economic Development, said numbers don’t tell the whole story. He said the purpose of movie tax credits is to grow the industry, and that is showing positive results.

Maybe so, but what proof do we have? Daryl Purpera, the legislative auditor, said agencies aren’t required to track the performance of the nearly $3 billion in business tax breaks given from 2005 to 2010. The other $1.8 billion in tax advantages went to individuals.

Legislators talk every year about doing something about tax breaks that have gotten out of hand, but little has been accomplished. Lawmakers continue to give tax breaks at every session.

The most serious effort to date to set up an effective monitoring system could come late this year when a special commission starts analyzing tax breaks, exemptions, suspensions, deductions, credits, refunds and rebates. Sen. Jack Donahue, R-Mandeville, chairman of the Senate Finance Committee, sponsored a resolution to create the 14-member commission.

The commission is to convene no later than Sept. 1 and must report its findings to Senate President John Alario, R-Westwego, and House Speaker Chuck Kleckley, R-Lake Charles, no later than Feb. 1, 2013. It is supposed to come up with an effective way to determine the economic impact of tax breaks, whatever form they may take. The system created would be used to determine which tax breaks are productive or outdated and whether they should be temporarily or permanently eliminated.

Most legislators think this is a great way to eliminate ineffective tax breaks and exemptions. The net result could be more revenues for state budgets that have endured numerous cuts over the last four or five years. Gov. Bobby Jindal’s administration is currently having to deal with an $859 million reduction in its $7.7 billion Medicaid budget that serves many poor citizens in this state.

Unfortunately, Jindal insists the elimination of a tax break that could bring in more general fund revenue is a tax increase. The governor contends the elimination of a tax break means it has to be given in the form of a tax break or exemption to someone else or returned to taxpayers.

“We’re opposed to raising taxes, but we’re open to any review of the tax code that would make it fairer, flatter and lower for Louisiana businesses and families,” the governor told The Advocate in a statement.

Jindal apparently doesn’t have a problem if the $859 million reduction in the Medicaid budget results in cuts to charity and rural hospitals, hospice care, a breast and cervical cancer program and rates paid to nursing homes, doctors and other health care providers.

Moret, his economic development chief, agrees with his boss.

“Any changes that are made must be budget neutral and not an attempt to just raise revenue,” Moret told The Advocate.

Donahue said he isn’t bothered by Jindal’s “budget-neutral” directive. That comes as no surprise, of course, because legislative leaders know what happens to those who disagree with anything the governor wants to do. They are like the “old soldiers” the late Gen. Douglas MacArthur talked about in his farewell speech — they never die; they just fade away. 

Jindal has demonstrated on many occasions that he doesn’t believe in government transparency. So the less we know about how productive his administration has been, the better he likes it. The governor appears to take great pride in vetoing any legislation designed to determine the effectiveness of tax breaks and his new health care and other programs. 

Some good may still come out of the commission’s work. As Donahue said, the development of a method to analyze tax credits would be “a pretty big deal.” 

One reader of The Advocate came up with an interesting question about millions in tax breaks Jindal and other governors have given to the state’s two professional sports teams with few strings attached.

“Saints and pro basketball? Where does all of the money go?” the reader asked.

 Whether the commission’s final report will be productive or simply gather dust on a shelf remains to be seen. Maybe if we don’t expect too much, we won’t be disappointed. Meanwhile, look for the state to continue giving away potential tax dollars that could be used for worthwhile causes. 

Jim Beam, the retired editor of the Lake Charles American Press, has covered people and politics for more than five decades. Contact him at 494-4025 or [email protected]



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