Gov. John Bel Edwards has three major accomplishments since taking office. With the help of the Republican Legislature he's raised more than $7 billion in taxes. With a stroke of the pen, he created 500,000 new government dependents by expanding Medicaid through Obamacare. Thirdly, Edwards used his pen in 2016 to significantly change Louisiana’s Industrial Tax Exemption Program, or ITEP.
ITEP is a program designed to offset Louisiana's heavily anti-business tax code by allowing local governments to delay property taxes on new projects for a set period of time. Before Edwards' executive order, ITEP requests were processed at the state level. Edward's executive order brought local governments into the mix by giving them veto power over local property tax breaks.
New Orleans has been one of five local governments to take advantage of the new ITEP rules so far. This past week, the City Council required businesses seeking local property tax breaks through ITEP to pay employees at least $18 per hour. The businesses must also locate in neighborhoods that are struggling economically. And companies seeking ITEP tax breaks must demonstrate good-faith efforts to funnel at least 45 percent of their work to New Orleans residents. Beginning in 2010, that number rises to 50 percent with 30 percent of workers required to be disadvantaged.
"I stand with those who are tired of New Orleans not getting its fair share," Councilwoman Helena Moreno said. "At least with these rules, we can start getting a piece back."
But with rules that restrictive, New Orleans is sure to lose out on new investment.
"Consistency and predictability are key to the ITEP’s value and success. Without these, manufacturers are discouraged from considering Louisiana for expansion of their plants," wrote Stephen Waguespack, president of the Louisiana Association of Business and Industry. Gregory Bowser, president of the Louisiana Chemical Association, and Tyler Gray of Louisiana Mid-Continent Gas Association also signed that letter to state manufacturers.
Waguespack, Bowser and Gray claim that since Edward's 2016 executive order, the number of projects in Louisiana has collapsed 72 percent from the previous six-year average. They say Louisiana averaged 684 new projects annually over the previous six years. Since Edward's signed his executive order, the state will see only 192 projects this year according to Louisiana Economic Development data.
"These declines occurred during a year when our national economy saw a robust re-emergence of manufacturing activity of which Louisiana should have been a significant beneficiary, " wrote Waguespack, Bowser and Gray.
Manufacturing jobs account for 21 percent of the total state economic output and they employ 7 percent of our workforce paying an average of $87,000 per year. A 72 percent drop in capital projects is a big deal and will have a lasting ripple effect on Louisiana's economy. Louisiana saw a sharp drop in personal income growth in the third quarter of this year, down a staggering 4 percentage points from from the first quarter. Louisiana currently has the fourth-highest unemployment rate in the nation.
The financial website 24/7 Wall St. recently ranked Louisiana 48th in the U.S. for its economic strength. It should come as no surprise the U.S. Census Bureau reports from the summer of 2017 to the summer of this year the state lost approximately 11,000 residents. Louisiana lost more people in that time period than 46 other states.
Louisiana is one of only 16 states to levy a capital stock tax or franchise tax on businesses. It's currently the third-highest such business tax in the nation. Local governments also levy taxes on business inventories, which are then refunded by the state through a complex credit system. And the state has nearly the country's highest sales tax. The Tax Foundation ranks Louisiana 44th when it comes to business tax climates. We dropped from 39th to 44th under Edwards.
The national group, Americans for Tort Reform, recently designated Louisiana as a judicial hellhole, estimating lawsuit abuse costs the state's economy $1.1 billion and more than 15,000 jobs. The organization blamed Edwards using lawsuits to shake down the oil industry as a major part of the problem.
When it comes to attracting new high-paying manufacturing jobs, the state is clearly heading in the wrong direction.