According to the latest report from the Tax Foundation, on the watch of our Rhodes Scholar-in-chief, Louisiana dropped two notches (a negative change) in State Business Tax Climate. Let me repeat. LA has dropped. (Report here.)
Louisiana remains far behind our two biggest economic competitors — Texas and Mississippi.
Reading the report one gets the impression that Stephen Moret, our ethically-challenged, head of economic development doesn’t have a clue how to approach economic development. Here are a few excerpts:
State lawmakers are always mindful of their states’ business tax climates, but they are often tempted to lure business with lucrative tax incentives and subsidies instead of broad-based tax reform.
Lawmakers create these deals under the banner of job creation and economic development, but the truth is that if a state really can’t attract employers without such packages, it is often because punitive tax laws have created a woeful business tax climate.
…[I]t’s a vicious cycle. States give away tax revenue to new businesses, creating pressure for higher tax rates; and the higher the state’s statutory tax rates, the more important special packages become. A far more effective approach is to systematically improve the business tax climate for the long term so as to improve the state’s competitiveness.
Sound familiar? It should because it is exactly the plan that has been submitted to leges by our Rhodes Scholar governor and our Harvard-educated economic development guru. As a result Louisiana appears to have fallen head-long into the trap of the vicious cycle described above.
Where’s the lege?
The report correctly assumes that leges have the ability to do something and offers them suggestions:
1. Taxes matter to business. Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system, and the long-term health of a state’s economy. Most importantly, taxes diminish profits. If taxes take a larger portion of profits, that cost is passed along to either consumers (through higher prices), workers (through lower wages or fewer jobs), or shareholders (through lower dividends or share value). Thus, a state with lower tax costs will be more attractive to business investment, and more likely to experience economic growth.
2. States do not enact tax changes (increase or cuts) in a vacuum. Every tax law will in some way change a state’s competitive position relative to its immediate neighbors, its geographic region, and even globally. Ultimately it will affect the state’s national standing as a place to live and to do business. Entrepreneurial states can take advantage of the tax increases of their neighbors to lure businesses out of high-tax states.
These suggestions to our leges are hardly more than common sense which appears to be in short supply at the Capitol.
A better use of the leges’ time, instead of doing the governor’s constitutionally-mandated job of reducing the budget to fit the revenues, is to take on the responsibility of economic development.
Making Louisiana a Mecca for businesses is simple; eliminate business taxes and government red tape. The only downside is that government may have to go on a temporary diet until the state’s economy can grow and produce more government revenues.
What do you prefer, a temporary diet for state government or more temporary taxes?
C.B.
1
CB
9:38 am
