APPEL: Bad Tax Policy Raises Little Revenue And Cripples Entrepreneurship In Louisiana

Louisiana desperately needs to diversify its business base in order to create good jobs; for too long we have depended upon oil and gas exploration and petrochemical manufacturing. As we painfully know employment in exploration is highly subject to world commodity prices and politics and the nature of extraction leads to land loss and pollution. When oil and gas prices decline petrochemical manufacturing does well but, unfortunately, modern plant design has eliminated large numbers of human workers.

For those of you who know me, you are aware that I am a great opponent of crony capitalism. Simply put I believe that the laws of economics should determine which businesses survive and prosper and that government should play a stimulus role but not a sustaining role in business attraction and growth.

Sadly one of the byproducts of the recent special session was the passage of HB 50. This bill, like so many others, was presented as a way to soak up more taxes from business. Without any idea of the impact and with only the goal of collecting taxes, the Administration had included it in its “package” and had pushed their allies to promote and vote for it.

The idea of this bill was a way to undo legislation that was passed a few years ago in which we eliminated the collection of capital gains taxes on business sales. The need to get rid of this tax was desperate as businesses were leaving the state just to escape this foolish idea; in doing so great jobs were being displaced to Dallas, Houston, Atlanta, and so on. The tax and spenders in the legislature and the new Administration hated the very principle of allowing an entrepreneur to keep their earnings and so they targeted them. It was perceived an easy pot of taxes to go after and they could not stand that we had eliminated this tax. Now they have their payback, but they have placed a major jobs killer in our tax laws.

Simply put businesses will think twice about starting up in Louisiana. Why would they? Is there a compelling reason that they should? Let me think, bad schools, astronomical legal costs and insurance rates, poor infrastructure, uneducated work force, and now, add to all that a tax that says, if you want to start up or move here, let’s say a high tech firm, then we will come after you for the gains that your hard work created. It doesn’t matter that we already have taxed you on many levels; we will tax you again when you sell your business, just because you were foolish enough to be in a state that values big government over private sector jobs. Sorry, your mistake, you trusted us!

The greatest irony of all about this bill is that it doesn’t even raise much money. All it does is demonstrate that our political leadership, unlike that in so many competing states, is dominated by people who are jealous of success and who unfortunately have the power to punish that success! No doubt that business will respond with its feet and we will see more government dependence and crony capitalism as free market business will just not startup or move here.

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