Our Views: A new look at old credits

When Gov. Bobby Jindal kicked over the anthill of the tax code, he unleashed a lot of fire ants which are now scurrying around looking for legislators — or a governor — to sting, because the Jindal proposals may hurt many interest groups.

We question the wisdom of the main focus of Jindal’s plan, which is to shift the tax burden from income taxes to sales taxes. But within that broad description are a large number of other changes, and we think there are several which deserve consideration, apart from the Legislature’s larger decision about the sales tax increase.

Even if the Jindal plan is rejected, there are parts of it that deserve to live.

The Public Affairs Research Council noted with approval two of the ideas from Tim Barfield and Stephen Moret, the governor’s key aides on this front.

One is a restructuring, with an eye to reduction, of the movie tax credits, and considerable changes in the Enterprise Zone tax credit program.

“The investment return in the form of taxes generated by film production has not nearly compensated for this state expense,” PAR said of the tax credits, costing the state $1 billion since 2006. PAR generally endorsed the suggestion of tightening rules for what movie costs should be given tax credits.

On Enterprise Zones, Moret’s Department of Economic Development has previously questioned the wisdom of the tax incentives for retailers and other businesses that don’t generate new jobs — they simply shift around existing employment, and get a tax credit. Texas, for example, has much tighter rules for a similar program.

“The department has offered recommendations for improvements that would make the program a more effective business incentive at less cost to the state,” PAR noted. “The state should consider changes to the program.”

We agree, but we also note one of the issues for all such programs. It was raised by PAR in its discussion of the movie tax credits: “The purpose of the 11-year-old program was to build a viable movie-making infrastructure with a talented labor pool in Louisiana. The vision was that the state eventually could become an attractive base for movie-making without heavy reliance on a large, perpetual and growing subsidy.”

The problem with almost all of these programs is that they promise economic development by spending the taxpayers’ money in this “vision” of rosy scenarios, backed up by heavy lobbying for the favored industry among politicians.

What do we actually get? All too often, “a large, perpetual and growing subsidy” for businesses that take the money for activities that they probably would do anyway, because the underlying economic reasons for a business activity are far more important than state tax breaks.

There are real problems when “economic development” comes to mean “other people’s money,” for that is where the taxpayer’s credits and other incentives come from. Every exemption and break should be rigorously reviewed, preferably by third parties and not the state officials who benefit politically from keeping them going.

In the case of the movie tax credits, we like to see Louisiana hosting movies and television shows, even those perhaps not showing our people in the best light. But how long does the benefit need to run before the industry is ready to stand on its own?

In past years, the Department of Economic Development has never had an answer for that question. Because other states and Canadian provinces are offering credits, Louisiana’s taxpayer must be on the hook indefinitely, it seems.

If Jindal’s discussions this year yield anything, it is, we hope, that the perpetual subsidies ought to get term-limited — and firmly.