WAGUESPACK: Louisiana’s Business Culture Lags Behind Our Everything-Else Culture

Louisiana has many strengths. We have a fantastic culture, welcoming people, a rich heritage of community and ample natural resources. We are the sportsman’s paradise and, yes, we can cook with the best of them. But, if we are being honest, we also have some faults.

We have too often looked the other way over the decades when corruption and political shenanigans were obvious to see. Our educational system needs serious attention, and our infrastructure is in desperate need of repair. We have long tolerated the roller coaster that comes with a boom-or-bust economy and too often scratched our heads as we pondered why companies and their high-paying jobs flock to other states rather than ours.

The answer is simple. Our business culture does not match the caliber of our community culture. Our laws create a hostile business environment, our elected leaders have not stepped up to address these problems in a serious way and we as voters have let them get away with such behavior for far too long.

The specifics on how to fix this are not hard to figure out. Louisiana’s business climate faces well-documented, perennial challenges: an unfriendly legal environment, an under-skilled workforce and an unnecessarily complex tax system, among others.

In recent weeks, we at the Louisiana Association of Business and Industry (LABI) have released two compelling reports on tax issues. One details the tremendous positive impact the Industrial Tax Exemption Program (ITEP) has made on Louisiana in terms of increased teacher pay, worker wages, and state and local tax collections. The second report cites data from the Legislative Fiscal Office and an analysis from Ernst and Young to detail the tremendous amount of business tax increases passed over the last three years in Louisiana and the impact those have had on our competitiveness. Both reports and much more research can be found on our website (www.labi.org/research).

Louisiana’s business tax climate is currently ranked #44 in the nation as a result of this complicated framework as well as the imposition of numerous taxes on businesses that other states do not impose. The inventory tax, high state and local sales taxes on business inputs such as utilities and manufacturing machinery and equipment (MM&E) and an expanding franchise tax top the list of uncompetitive taxes imposed on Louisiana businesses.

Louisiana business taxes are estimated at $10.1 billion annually for state and local government. In fact, Louisiana ranked #1 in the nation for the annual increase in state and local business taxes from 2016 to 2017 – largely as a result of action by elected officials to increase collections of corporate income and franchise tax, raise the sales tax rate and expand the business inputs to which sales tax applies. Rules generated by executive orders from Governor Edwards in 2016 (and revised in 2018) also significantly limited ITEP, resulting in no financial benefit to the state but requiring increased property tax payments to local government.

The Council On State Taxation (COST) reports that business taxes grew two percent on average across the U.S. while increasing an estimated 12.5 percent in Louisiana. For a closer comparison, Texas grew state and local business taxes by 3.3 percent, while Mississippi and Arkansas reduced by 0.6 percent and 0.9 percent, respectively.

National data confirms the sizable increase in business taxes projected by the Louisiana Legislative Fiscal Office in each of the more than 30 bills passed by the Legislature and supported by the governor raising business taxes from 2015 to 2018. In just three years, the totality of this legislation required an additional $3.2 billion from Louisiana businesses for the operations of state and local government. While some of these changes were temporary, more than 20 bills made permanent changes to Louisiana tax policy to drive up tax revenue from employers. Unfortunately, most of the new tax policy has only served to further complicate and burden Louisiana businesses, as state rankings for tax competitiveness fall even lower.

COST data indicates Louisiana businesses pay 40 percent of all state taxes and 58 percent of all local taxes for a total of just under half of all taxes collected in Louisiana (49%). Of note, Louisiana businesses fund state and local government at or above the national average, where businesses pay 38 percent of state taxes, 52 percent of local taxes and a total of 44 percent of all state/local taxes in the United States.

In addition to the three major categories of property, sales, and income tax, large categories of business taxes in Louisiana include severance tax, excise taxes, and business and occupational licenses, totaling hundreds of millions of dollars annually for state and local government.

Taxes are just part of the problem… further research on these other topics can also be found on our website.

Our legal climate is ranked last in the nation due to laws designed to encourage big paydays through predatory litigation. This has chased away many in the energy industry and is a big reason our car insurance rates are almost double the national average. Government spending in Louisiana is the highest per capita in the South, yet our services still struggle to meet demand. Many of our schools, despite billions in annual taxpayer investment, still fall short in preparing kids for the workforce. All the while, reforms to address these issues are routinely killed each year in the Capitol.

This long-standing tolerance of bad policies and uninspired leadership is killing us. This toxic recipe scares away investment and encourages our young adults to look elsewhere for prosperity. It comes as no surprise that our unemployment rates are some of the highest in the nation and our workforce participation rates are the lowest they have been since the 1970’s.

We can do better. We can build an economy, workforce and business climate that match the excellence of our people, community and traditions. 2019 is an election year and it is the year to change all of this. Demand more from your elected officials, give them the backing they need to be courageous and hold them accountable when they are not.

It’s time to get informed on the issues that matter. Louisiana has so many good traits of which we can all be quite proud… but it’s simply no longer acceptable that we tolerate the bad ones.

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