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Competition comes in the form of tax exemptions

February 5, 2019
Originally Posted on The West Side Journal

State legislators should strongly consider a simplified code to lure manufacturing jobs under the Industrial Tax Exemption Program (ITEP), according to the head of the state’s largest lobbying group for business.

Stephen Waguespack, president of the Louisiana Association of Business and Industry, told the Press Club of Louisiana that the competition from other states – particularly Texas – has left Louisiana in the dust in efforts to attract new manufacturing jobs.

The situation has gotten worse with the East Baton Rouge Parish School Board’s decision to deny ITEP requests from the ExxonMobil Baton Rouge Refinery, he said.

“You know what happened after that?” he asked. “West Baton Rouge said, ‘Just come here instead.’”

He used West Baton Rouge Parish as an example of how other parishes, as well as other states and foreign countries, will make a push for jobs when one area rejects ITEP benefits.

The rejection of the Exxon request and potential pullout on projects in the hundreds of millions of dollars not only threatens jobs on site. It brings concern from car dealerships, print shops, and small businesses.

“Those are the ones who feel most threatened if or when big investments leave the state,” Waguespack said.

The current process involves initial approval from the state level, followed by approval from local entities – including a parish council or police jury, the school board, the sheriff’s office.

The executive order also scaled back the tax exemptions from 100 percent over 10 years on manufacturing, down to 80 percent.

Waguespack said he does not oppose local input, but believes the state should simplify the process for prospective developers looking to bring manufacturing jobs to the state.

“I think the incorporation of local input is good for development – and it needs to be that way – but local input and local chaos are two different things,” he said. “In some parts of Louisiana, the chaos is out of control.”

“With what we have now in Louisiana, you have to go through a local gauntlet, and you’re lucky to emerge unscathed,” Waguespack said. “The current rhetoric is going out of control, and we have to stop the escalation ... it’s destroying our business climate.”

In Texas, companies go before only one board on the local level.

Louisiana’s hampers the state’s chances to lure manufacturing jobs, and the tax climate doesn’t help, either.

“We feel like the ITEP is misunderstood,” Waguespack said. “It’s the most important economic tool we have, and parishes with industrial tax emption program are the ones making more money than other parishes,” he said. “Teachers on average get paid more than in other parishes, local governments collect more taxes than in other parishes.”

Industrial jobs account for seven percent of the workforce and 130,000 jobs in Louisiana, he said. Average pay for manufacturing workers in Louisiana is $87,212 – more than double the state average of $41,587, according to statistics Waguespack provided.

The business industry boasts those averages in Louisiana despite a higher tax burden here than in other states, he said.

The Louisiana business sector paid an estimated $10.1 billion in taxes to state and local government in Fiscal Year 2017. Sales tax comprised the largest share of the tax revenue (37 percent), followed by property tax (32 percent), excise taxes (15 percent), licenses (8 percent), and income tax (7 percent).

Louisiana also ranked No. 1 in the nation for an annual increase in business taxes from 2016 to 2017, due to legislation that increased collections of corporate and income tax, a hike in sales tax and the expansion of business input to which the sales tax applies, he said.