In Louisiana, we’ve been blasting a shotgun in the air and calling it hunting. We’ve gone through billions of dollars in shells to knock down a half limit of ducks. I’m talking about the state’s industrial tax exemption program, ITEP, and its effect on your property taxes.
I’ve held off from commenting on this since I got off the Baton Rouge Metro Council, for a few reasons. First, I can’t stand it when washed-up, has-been former politicians opine on every issue to stay relevant. I also own a business related to industry, so writing this piece very well may cost me money down the road. The big guys hate it when you point out that the emperor has no clothes.
But I can’t hold off anymore. This issue is going to get decided in the next few weeks, and it’s killing me to see our elected leaders about to give away the store. If we don’t raise a stink, it’s going to cost every taxpayer and small business in town a LOT in taxes for a very long time.
What’s appalling is that it’s the conservatives on the Baton Rouge Metro Council who have been carrying the water for what has become a huge welfare program. The council is supposed to be setting up standards for approving industrial tax exemptions. But its conservative bloc has been taking its cue from the Baton Rouge Area Chamber crowd.
BRAC is doing what it was set up to do, which is to help its members get as much taxpayer loot as possible. So I don’t blame the Chamber. They’re doing their job, which is to lobby for their members. But the Metro Council members aren’t doing theirs, which is to be YOUR lobbyist.
Business tax incentives can be a legitimate tool to spur economic development. But we’re so far from legitimate on this one, it’s not funny.
The big petrochemical corporations have exploited the intent of ITEP for years. Most of the exemptions don’t go to “lure” a plant to town or spur an expansion. We’ve been giving exemptions to subsidize companies’ run-of-the mill annual capital expenditures. We do it every single year to the same companies, and we’ve been doing it for 80 years.
You know how many of these “incentives” ExxonMobil has gotten in the last 10 years? Remember, they’ve been in Baton Rouge since 1909 – for about 110 years.
Over the last 10 of those years they’ve gotten FORTY-SEVEN separate ITEP exemptions in East Baton Rouge Parish alone. Those exemptions are taking – wait for it – $2 BILLION (with a “b”) of Exxon’s property off the tax rolls right now, this year, in 2018.
What happens when you keep billions of dollars of industry’s property permanently off the tax rolls by cycling these exemptions every year? It jacks up tax rates for everybody else, to compensate for the property being kept off the rolls for the lucky few.
This is all supposed to be all about job creation, right? That was the original intent of ITEP –to land monster projects with a big return on investment, which is to say, lots of permanent high-paying jobs.
What’s gone on, though, is the opposite. These companies are getting incentives to kill jobs.
Take the petroleum industry. They’ve got boilers, pressure vessels, columns, pipelines and lots of other machinery and equipment you need to crack a barrel of oil. All that equipment wears out fast, so it gets capital upgrades and modernizations every year and needs to be replaced wholesale every fifteen to twenty years.
THAT’S what we’ve been giving exemptions for. Not to land a brand-new 2,500-job expansion or a greenfield project, but to subsidize these annual upgrades and modernization projects.
You know what happens when you upgrade to the latest technology? You get more productive. You don’t need three guys sitting there watching the gauges. You just need one.
That’s right. Fewer jobs.
To be clear, I don’t have a problem with mechanization. That’s the way of the world. That’s progress. That’s capitalism. But for God’s sake, we shouldn’t be putting in taxpayer money to subsidies mechanization, which they’re going to do anyway because they make way more money that way.
How bad has this gotten? Over the last 20 years, Baton Rouge taxpayers have given ExxonMobil $700 million in taxpayer subsidies with these exemptions. Over that same period, they’ve cut 1,900 jobs.
What it means to be a libertarian-leaning conservative for me is that you don’t give away taxpayer money for government programs that cost everybody a ton of money and don’t do much. That’s true whether it’s ITEP, CATS or the Council on Aging.
So why we do complain about the low return on investment of CATS and the Council on Aging but turn a blind eye to the billions of dollars we are shoveling out the door in corporate giveaways that are jacking up our taxes and not creating jobs?
What kills me is that we’ve let the left monopolize this issue with the argument that we ought to scale back the exemptions and give the money to teachers unions and to fund more bloated government programs.
What we ought to do is to stop the exemptions that don’t make sense, which means the ones going toward modernizations and upgrades that are going to happen anyway. Then we use that revenue to cut everybody’s property tax rates or fund areas that we can all agree need more resources.
That’s not some far-out idea. That’s EXACTLY what would happen if conservatives get engaged on this. You know what happens the minute a company doesn’t get an exemption one year? The property they would have had exempted goes onto the tax rolls.
What happens when more property value goes onto the rolls is that, by law, the millage rates for everybody get rolled back to the level that raises the same total amount as before the new property came into the system, and your taxes go down. That’s the law.
Here’s the bottom line. Some companies have not been paying their fair share, not through any fault of theirs, but because we’ve let it happen. As a result, you and I and every small business in town has been paying more in taxes to cover the cost of those giveaways.
The companies aren’t doing anything wrong. They’re doing exactly what I would do if I were in their shoes. If there’s free money to be had, and weak leadership that won’t say no, of course I’m going to ask for it. Who wouldn’t spend a couple hundred grand on lobbyists, association memberships, political contributions and steak dinners for elected officials to gain millions upon millions of dollars a year? That’s just good business.
But as long as the Mississippi River and the Gulf of Mexico don’t pick up and move, Baton Rouge will be a competitive place to refine a barrel of oil. That’s a fact, Jack. If someone tells you otherwise, they’re lying to you.
Conservatives need to stop defending this flawed program and start fighting to make it make sense. That means making the program more strategic to focus on attracting new projects and creating jobs, not giving taxpayer handouts for modernizations, upgrades and planned maintenance activities.
Weird as it may seem, I like paying my bills. I enjoy paying my share. It helps reinforce to me that I’m a net contributor to my town. That’s probably why it bothers me when other people don’t do their part.
So call your Metro Council member today. Stop them from blowing open the doors on the candy store.
If you don’t, we’re all getting stuck with the bill.
Ryan Heck, a Baton Rouge businessman, is a former member of the East Baton Rouge Metro Council.