And the hits just keep on coming.
Employers in Louisiana have felt the pinch over the last year of an economy in recession, billions of dollars in more state taxes and a host of new mandates proposed that will make it even harder to compete. Sagging oil prices saddle our producers and service companies with more debt than income and this year’s ramp up in Obamacare penalties will put many small to mid-size businesses in an audit trap thanks to a cumbersome maze of new reporting requirements.
The Louisiana economy needs some relief; but according to a few recent headlines, help does not appear to be on the way.
A new report released this week by the Mercatus Center at George Mason University analyzed the impact of federal regulations on all 50 states. Louisiana ranked first as the state most negatively affected by the regulatory onslaught coming out of Washington, DC. In fact, the report said that the impact on Louisiana’s economy is 74 percent greater than the national average, primarily due to the activist EPA agenda to crack down on domestic energy production and manufacturing jobs.
The report states that the industries most targeted for environmental regulation include industries most critical to the Louisiana economy, including, “utilities; chemical products manufacturing; motor vehicles, boats and trailers, and parts manufacturing; forestry, fishing, and related activities; and petroleum and coal products manufacturing.”
The Louisiana chemical manufacturing industry, which is subject to 10 times the regulations as the average industry, is cited as the second largest industry in the state and three times greater than the national average for other states. In fact, the report states the EPA specifically targets the industry, noting the agency has issued 29,293 industry-relevant restrictions, roughly half of the total federal restrictions on the industry.
Additionally, the federal government heavily regulates employers in the retail trade, energy production and construction sectors. As an example, the report states that the Louisiana oil and gas industry, “is about four times more important to the state’s private-sector product than it is to the nation’s private-sector product. It is also subject to a substantial number of industry-relevant restrictions, totaling 14,896.”
This report has statistically shown what we already knew: Washington, DC regulators continue to target the industries most critical to the Louisiana economy.
On the heels of this headline, we also were informed this week during a speech at the annual meeting of the Public Affairs Research Council that more state tax increases are likely to come in June during a second special session to be called by the governor.
Ironically, the keynote speaker at the meeting was Scott Hodge, the president of the Washington-based Tax Foundation. In his remarks, Hodge discussed the numerous problems with the federal tax code and reminded the group that Louisiana now ranks last in state sales tax code competitiveness due to last month’s special session.
The governor is pushing the second special session because the $26.5 billion FY 16-17 proposed budget – which is $1.5 billion larger than last year’s budget – has a shortfall of roughly $750 million, despite the more than $3.5 billion in new taxes raised over the next five years in the recently-concluded special session. While there is rampant speculation that these new taxes will generate more revenue than the current projections show, there are some who want to push forward in June with new tax proposals before those numbers even come in.
Thus far, the administration has proposed that the two primary available options to solve this remaining deficit are to put the majority of cuts on TOPS and hospital provider agreements or to raise new taxes.
Other stakeholders and policymakers continue to seek a more comprehensive and balanced approach that first understands how much new tax revenue will actually be generated by last month’s special session and then invests those available dollars in priorities while demanding more efficiencies and budget reforms. Those competing political visions will continue to play out in the Capitol and headlines for the next several months.
Meanwhile on the economic competitiveness battlefield, another relevant headline was delivered when Mississippi announced this week it was cutting over $400 million in taxes over the next 12 years. This package includes phasing out the corporate franchise tax (which Louisiana expanded just last month), as well as cutting income and self-employment taxes.
So, to sum up this week’s headlines…federal regulations hit Louisiana harder than any other state…a national tax expert delivered a speech critical of our new taxes…public officials are stressing that more tax increases are coming in June…Mississippi is choosing to cut taxes and become more competitive than its neighbor to the west.
These were some relevant, albeit unfortunate, headlines this week. Just another week of stories with more bad news when the Louisiana economy can least afford it. While these stories are becoming all too familiar, they do not accurately reflect the work ethic, loyalty, quality and dedication of Louisiana’s employers and employees.
It’s long past time for a shot in the arm, rather than another punch to the gut. I am not sure how next week’s headlines will read, but hopefully, we will soon start seeing a new Louisiana economic story being told.