There’s a fascinating chart in the annual legislative summary published today by the Louisiana Budget Project (LBP) that suggests that Louisiana’s budget crisis was not caused by too much spending, but by a dearth of tax revenues.
Last week, I noted that the deep reductions to higher education and health care are directly related to tax cuts enacted by Govs. Jindal and Blanco several years ago which, over just three years, amounted to $1.8 billion in lost revenue.
This chart, featured in the report, shows another source of our revenue problem — tax exemptions (mostly to corporations) granted by legislators. They’ve grown 167 percent in the past decade.
That’s almost $5 billion in tax revenue, each year, that the state gives up.
An LBP report from March 2011 details the extent to which Louisiana government subsidies Louisiana corporations:
Louisiana [is] at the top of the list for having one of the costliest and most ineffective tax exemption programs in the country. Louisiana’s Industrial Tax Exemption program exempts manufacturers from property taxes on expansions and investment projects for up to ten years. This causes a significant loss in revenue for local parishes across the state that affects their ability to fund services such as education, human services, and transportation infrastructure.
According to the most recent report from the Louisiana Board of Commerce and Industry, Industrial Tax Exemptions awarded in 2010 are estimated to cost Louisiana over $946 million over the next ten years. In 2009, Louisiana awarded exemptions worth $745 million and in 2008, over $614 million. That means that over a three-year time span, more than $2.3 billion in potential revenue has been lost in return for the creation of 7,256 potential new jobs.
So, here’s what we have: Over the past three years, Gov. Jindal and the Legislature have cut state support for higher education by almost half a billion dollars. Meanwhile, over the past three years, the state has increased its support for Louisiana corporations (in just the area of industrial tax exemptions alone) by $2.3 billion.
In today’s report, the LBP notes:
Unless [cuts to higher education are] reversed, that trend will have grave consequences for the state’s economy. Unrelenting cuts in higher education that make college less affordable and accessible can contribute to a downward spiral, resulting in a greater concentration of low-wage and low-skilled jobs. By 2018, Louisiana is projected to be second-to-last among states when it comes to the availability of higher-paying jobs requiring a post-secondary education, and near the top for low-paying jobs that require little education. [my emphasis]
The report today does deliver a bit of good news about all of this:
If there is a silver lining to the most recent revenue drop, it’s that policymakers in both parties finally appear ready to tackle one source of the persistent shortfalls by agreeing to take an in-depth look at the hundreds of exemptions, rebates and other loopholes in the tax code. A bipartisan commission created by Senate Finance Committee Chair Jack Donahue will begin work in September, and is to release a report by late winter.
A thorough review of tax exemptions—as envisioned by the Donahue Commission—has the potential to bring in revenue we need to invest in the future.
Let’s hope our governor and the Legislature come to the conclusion that Louisiana might be best served by subsidizing the futures of young people, including those who want a college education.