SADOW: Louisiana Needs To Do Something About Its Business Cost Rankings

Once again, Louisiana finds itself on the wrong side of the fence keeping some bad company. Fortunately, fairly immediately some things can happen to improve matters.

Cloud software platform Approve.com released rankings for states where doing business is most and least costly. For the continental U.S. plus the District of Columbia, it reviewed four factors – average annual wage, top corporate income tax rate, and average prices for utilities like internet and non-residential electricity, equally weighed.

Perhaps unsurprisingly, Louisiana’s western neighbor Texas came out on top. Equally predictable, among the top 20 states in the ranking politically red states comprised 18 with the other two being purple, and included most of the southern states.

Louisiana wasn’t among these. Instead, at 24th it joined eight other red states in the bottom 29, where all blue states and all other purple states landed. Among southern states, only Alabama trailed it and the bottom ten had seven blue, two red, and one purple state.

Middle of the pack isn’t so bad, but compared to its peer group Louisiana should do better. And happily the means to climb the ladder are close at hand, a review of where the state ended up in each category reveals.

The index gigged the state the worst on corporate tax rate, with its 8 percent ceiling making it 11th highest – and it didn’t take into account that, unlike most states, the state also charges a franchise tax. However, on the fall statewide ballot next month are constitutional amendments that, if approved, would slash the rate for corporations and ameliorate the impact of the franchise tax.

The state also pays a bit above average in internet costs, coming in 22nd. The state’s more rural characteristics hinders improvement here, but assistance in rolling out broadband implemented under the Republican Pres. Donald Trump Administration will help lower costs and disproportionately so compared to other states.

Oddly, electricity rates also held Louisiana back, strangely enough because the state typically has the lowest residential rates in the country. That’s as the index looked at commercial rates, where Louisiana barely cracks the top 20 (it actually was 24th in the index, but that used May numbers as opposed to the current July figures) and features one of the starkest difference between residential and commercial ranking of any state.

Greater pursuit of deregulating energy markets could help with this, for while deregulation has achieved only slightly better pricing for residential consumers, it has proved significantly more beneficial for commercial/industrial users. Regrettably, the Louisiana Public Service Commission in the past explicitly has rejected deregulation and has dragged its feet on changing that stance, despite pleas from large users who could benefit and as a result pass these savings onto both commercial and residential clients.

The state’s placement on average annual wage – disproportionately influenced by low-tech service employment and fewer and lower-status white collar jobs – at 44th helps to salvage its overall mid-list ordering. A better business environment driven by lower costs would create disproportionately better and/or more skilled jobs that would increase this level.

Louisiana can improve its economic development – which directly affects quality of life – by finding ways to make it a lower-cost business destination. Having the LPSC getting with the electricity deregulation program, taking advantage of the Trump-era program to expand broadband, and voting next month to allow corporate tax rates to diminish all can occur quickly to start sending down business costs and in the process make Louisiana a better place to live.

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