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State Rep. Julie Emerson, R-Carencro, with Gov. Jeff Landry during the bill signing for the tax package at the State Capitol on Dec. 5, 2024.

For years and years, state lawmakers have given away tax deductions, exemptions and exclusions to special interests.

And for years and years, experts have called on lawmakers to eliminate many of these tax breaks and use the savings to lower tax rates.

The state gave away $1 in exemptions for every $2 it collected in fiscal year 2023, the latest figures show.

Legislators and the administration of Gov. Jeff Landry began to address that issue during a special session in November devoted to taxes.

Lawmakers lowered individual and corporate tax rates — but raised the sales tax — and voted to end numerous corporate tax subsidies.

Instead of doling out money automatically through the tax code, Susan Bourgeois, who heads the state’s economic development agency, wants more money and authority for her agency to award incentives as sweeteners to companies planning to invest in Louisiana.

Still, old habits die hard. A number of legislators are seeking to win approval for new tax breaks or expand existing ones, claiming that the incentives will create new jobs and investment

State Rep. Les Farnum rarely buys that argument.

“Tax credits are the reason we’re in the shape we’re in financially,” Farnum, R-Sulphur, and a member of the Ways and Means Committee who regularly criticizes granting tax breaks, said in an interview. “We give away so much money. We have a host of brand new requests every year.”

An obscure document known as the Tax Exemption Budget lays out the issue in a hefty 636 pages.

The biggest tax break, at $824 million in 2023, excludes Subchapter S corporations — which pass their profits directly to shareholders to pay on their individual income tax returns — from corporate income taxes.

The second biggest was the sales tax exemption on grocery sales at $584 million.

The Tax Exemption Budget shows that legislators over the years have legalized a total of 564 tax breaks in the form of exemptions, deductions and exclusions from sales, income, corporate franchise and user fee taxes, at a cost to the treasury of $7.5 billion in 2023.

A tax break for gold bullion

In 2017, then-Sen. JP Morrell set out to force an examination of each tax break and get his colleagues to eliminate those that didn’t provide a good return on investment for taxpayers.

“We were unable to get traction,” Morrell, who is now president of the New Orleans City Council, recalled in an interview during the special session in November.

“Every constituency showed up, and they got to one or two legislators” to protect their favored tax breaks, he said.

In a more recent interview, Morrell asked about one that was in his sights: “Have they zeroed out the gold bullion credit yet?”

They haven’t, the Tax Exemption Budget shows.

“Sales of Platinum, Gold, and Silver Bullion and Numismatic Coins at Certain Trade Shows” cost the state nearly $4.2 million in 2023. Supporters of the tax break say it encourages investment in a long-term asset.

Fewer tax breaks, lower tax rates

Landry, Bourgeois and Revenue Secretary Richard Nelson argued last year that reducing tax rates will make Louisiana more attractive to investors and people interested in moving to the state.

Lawmakers bought the argument, establishing a flat individual income tax rate at 3% and the corporate income tax at 5.5% while eliminating the corporate franchise tax. They paid for those revenue losses by raising the sales tax 1 percentage point and by eliminating several dozen tax breaks.

One they repealed is called the Quality Jobs Program. It cost taxpayers $150 million in 2023 and produced a return on investment of only 11 cents in state tax revenue for every $1 given away, according to the revenue department.

A second one they repealed gave tax breaks that cost taxpayers $23 million in 2023 for investments in low-income areas known as Enterprise Zones.

Legislators also sharply reduced the cost of two other tax breaks with a low rate of return for taxpayers. The cap on tax credits given for movie and TV productions dropped from $180 million per year to $125 million and on investments in historic properties from $125 million to $85 million.

Jim Richardson, a retired LSU economics professor who chaired several blue-ribbon panels on taxes, called the changes by the Landry administration “a step in the right direction.”

Legislators also voted to end the Inventory Tax Credit on July 1. The credit allows businesses to receive a full reimbursement from the state for the property tax they pay on their inventory to local governments. Companies are pressing their case to keep it through House Bill 383 by Rep. Ken Brass, D-Vacherie. It would cost the state $372 million next year.

In an interview, Bourgeois said investors care most about lower tax rates.

A tax incentive, she added, “closes deals, it doesn’t get us deals.”

More tax breaks proposed

That view hasn’t stopped legislators from pressing for more tax breaks this year.

Rep. Joy Walters, D-Shreveport, for example, has offered House Bill 230 to give a tax credit for motor vehicle manufacturers and motor vehicle manufacturing suppliers. She said it would help revive a closed General Motors factory.

Rep. Jason DeWitt, R-Alexandria, has offered House Bill 186 to allow tax credits for employers of Louisiana National Guard members while they undergo weekend training.

DeWitt and several other legislators have offered costly bills to exempt tip and overtime payments from income taxes, saying the change would provide needed tax relief for workers.

“The flat tax to me negates the necessity for this because everybody needs to be taxed the same in order to make a level playing field,” Farnum told DeWitt during a committee hearing Monday.

A push for uniformity

Rep. Beau Beaullieu, R-New Iberia, is sponsoring House Bill 654, which would address a long-standing complaint of tax experts: the purchases of many goods are exempt from state sales taxes but not local sales taxes — and vice versa.

The Tax Foundation, based in Washington, D.C., has ranked Louisiana as the lowest-rated sales tax system in part because of this lack of uniformity, noted Julie Stokes. As a Republican state representative from Kenner several years ago, she chaired a special committee that tried to end this complexity. Legislators didn’t support her effort.

Beaullieu’s bill would not allow state lawmakers to grant new sales tax breaks unless that same sales tax break also applied to sales taxes imposed by local governments.

“If you know you can’t get the locals to embrace the sales tax exemption, then you should not just enact it at the state level,” Stokes said.

The chairs of the tax-writing committees, Rep. Julie Emerson, R-Carencro of House Ways and Means, and Sen. Franklin Foil, R-Baton Rouge of Senate Finance, both said they support the administration’s overall approach on taxes.

“We’d rather lower rates across the board than continuing to carve out specific industry groups,” Emerson said in an interview.

Added Foil: “Every group that wants one is coming in and presenting its case. We may let some get through the committee process,” citing a $10,000 per person tax credit for installing a fortified roof. He noted the program would be capped at $10 million per year.

Nelson, who leads tax policy for Landry, gets revved up when he talks about the shortcomings of tax breaks, as he showed during a legislative forum organized a month ago by the Public Affairs Research Council of Louisiana.

“I’ll tell you, if tax credits were the way to create jobs and opportunities in Louisiana, you’d have more jobs and opportunities than any state in the country,” he said. “We’ve tried that. We’ve been down that path for a very long time.”

Nelson added that tax breaks mean higher taxes for other taxpayers to make up the difference.

“Maybe it costs you only a couple of dollars on your tax return to pay for somebody else’s credit,” Nelson said. “But they make millions of dollars off of it, so they’ll show up and fight for it. That’s just how it works. Be very skeptical of anybody telling you that tax credits are the path to prosperity.”

Email Tyler Bridges at tbridges@theadvocate.com.

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