We were very pleased to learn last week that the ExxonMobil polyolefin plant expansion project worth about $500M would proceed. There had been serious concern, given recent developments with respect to the treatment of Louisiana’s Industrial Tax Exemption Program, or ITEP, by local government – and particularly as those affect ExxonMobil – about the company’s ultimate approval of what heretofore would have been a routine, no-brainer project for the betterment of our state and our workers. But the sad tale of what has recently happened to this highly successful industry and jobs incentive program under the John Bel Edwards’ administration bodes ill for future industrial development in Louisiana.
The tale begins over eighty years ago and ends at the present day as an expose’ on John Bel Edwards’ poor leadership and the dangers posed by Louisiana Democrats’ adoption of progressive-socialist ideology. Here’s why every worker and his or her family members should shudder whenever any local governing agency with taxing authority decides to cast a bureaucratic eye at an employer’s application for local tax relief via an ITEP exemption:
It is the early 1930’s and Huey Long’s populist “share-the-wealth” agenda is well underway in Louisiana. Gov. Long’s constant rants against the major oil companies during the worst depression in American history have rewarded him with almost total political power within the state. He uses this power to slash personal and utility tax rates and effectively eliminates personal property taxes for most citizens (read ‘voters’ in Huey’s lexicon) by instituting the homestead exemption, while greatly increasing taxes and fees on industry to make up for the ensuing deficits.
An assassin’s bullet ends Huey Long’s life in 1935, but the damage has been done and the political culture of Louisiana remains populist and hostile to industry for many years afterward. The Great Depression lingers on and by the late 1930’s the political heirs of the Long era have begun to realize that industry now needs an incentive to move to Louisiana.
Enter the Industrial Property Tax Exemption Program (ITEP), first passed in 1936 as a major incentive to draw larger industrial projects to Louisiana to offset the otherwise uncompetitive tax system created by Huey Long. Up until 2016, the ITEP statute gives power to the State Board of Commerce & Industry to grant local property tax exemptions of up to 100% for up to ten years for plant and manufacturing investments. The program is highly successful in attracting new business and encouraging existing business to expand or retain their operations in Louisiana.
Now it is true that critics have attacked ITEP because the state granted the local tax exemptions without local government approval, but recall that ITEP was intended to reduce employers’ overall cost of doing business in Louisiana in order to offset the many disadvantages of doing business here – the high taxes and fees, state and local government hostility to business and the resulting awful legal climate, the high crime rates and the poor public services and schools, etc. ITEP was and is an attempt to compensate for these factors by leveling the playing field for any employer building or expanding in Louisiana, and it has succeeded in doing just what it was intended to do.
Contrary to what opponents have claimed, ITEP never gives state or local money to industry; rather, it simply defers local property taxes. What it does do is stimulate investment and create thousands of jobs which generate additional sales, income and other taxes from the moment construction begins on the approved projects, many of which would not otherwise be located in Louisiana.
But it is now 2016 and the state has a new governor, a trial lawyer with little business experience and member of a Democrat Party increasingly controlled by vocal socialist-progressives. John Bel Edwards is under strong pressure from Together Louisiana and other far-left organizations to sign an executive order giving partial control of ITEP exemptions to various local taxing authorities, from parish councils and police juries all the way down to local school boards.
Under the new ITEP rules, these local governments must pass resolutions in support of the proposed projects before the ITEP local property tax exemption can be finally approved by the State Board of Commerce & Industry. Unfortunately, many of the officials on these councils and boards are left-wing political ideologues who also have little or no business experience and don’t comprehend the reasoning behind the creation of ITEP in the first place.
Together Louisiana begins agitating against the granting of ITEP applications unless absurd job and wage guarantees are included in the application which more than nullify the tax benefits, and soon finds a willing accomplice in the East Baton Rouge School Board. The EBR School Board promptly balks at granting a proposed ITEP tax exemption filed by ExxonMobil, which happens to be the largest employer in the Baton Rouge metro area.
To understand the dangerous absurdity of what recently happened to ExxonMobil this past January, you must also know that this particular project had already been completed and ExxonMobil had been assured that it would be grandfathered in under the pre-2016 ITEP rules. This obviously did not happen after Together Louisiana reared its leftist head. Although the larger mega-project just received approval this last week, it is important to note that that project’s request for a tax exemption had been grandfathered in under the pre-2016 rules.
Future projects seeking ITEP approval can no longer be grandfathered in under the pre-2016 rules, of course, and local property tax abatement as a reward for locating or expanding industry in Louisiana has just become a political football on the most uneven playing field in America, our own dear Louisiana. Thanks to Gov. Edwards, the ITEP tax exemption program has become hostage to Together Louisiana and the far left elected officials who so love to grandstand with their anti-corporate vitriol, as industry executives throughout the nation and beyond have no doubt noted by now.
Louisiana needs all the help it can get to attract or even retain the industry it has, as our very poor comparative growth rate and loss of population attest. Over the last three years of the John Bel Edwards’ administration, vast swathes of the state have deteriorated significantly and the quality of life of our citizenry has fallen ever further behind that of our prospering neighbors.
Tinkering with one of the state’s most successful industry attraction programs in order to placate Louisiana Democrats was a political mistake of the worst sort for the worst of reasons. As it now stands, as older projects in Louisiana are completed, fewer and fewer new ones have been scheduled to replace them. The uncertain status of ITEP is a major reason why, and all Louisianians will suffer as a result.
This mess was predictable and preventable, but apparently not by a governor beholden to the Louisiana Democrat Party. Perhaps our Republican delegation in the legislature can reverse the damage to the ITEP program in the 2019 legislative session, but better still to have a new, REPUBLICAN Governor on January 13, 2020!