September 09, 2012
When Louisiana lawmakers start to look at inefficient or outdated tax breaks on the books, one of the first on the list ought to be the Enterprise Zone break — a break that is subsidizing, in some cases, minimum-wage part-time jobs.
In two reports, the program has been found to stray far from its goal of tax breaks to encourage businesses to hire full-time workers.
Louisiana’s Enterprise Zone program subsidizes salaries through tax credits and rebates.
From 2008 to 2010, 930 businesses received the so-called EZ incentives. However, a report from the legislative auditor found that 632 of those businesses — 68 percent — were not located in a poorer area geographically. Those businesses received $123.9 million in incentives, 61 percent of the $203.1 million in incentives granted from 2008 to 2010.
The auditor’s report tracks with the objections to today’s program identified by the Department of Economic Development. The department’s 2009 report found that the EZ tax credits and rebates were being administered according to state law, but that various loopholes allowed a business to get the breaks even if it located in a prosperous area.
Another problem: Unlike neighboring states, Louisiana law allows retail establishments to get the breaks. That is, as the Economic Development report indicated, not promoting new economic growth but simply subsidizing moving jobs from one store location to another.
Louisiana’s Enterprise Zone program rules also allow for part-time employees to work a minimum of 20 hours per week for six consecutive months with no benefit requirements.
“None of the four competing, neighboring states to Louisiana allow businesses to include part-time employees when qualifying for EZ program incentives,” the audit report reads, adding this is another area in need of legislative attention.
Nor is there sufficient transparency in the administration of the law. That is not the fault of the department, either, but of legislative inattention.
Louisiana law prohibits the state from disclosing the amount of incentives received by each business. Texas shares with the public both the names of businesses that participate in the program and the amounts of incentives each individual business receives.
The state does release the name and location of each business applying for and participating in the Enterprise Zone program, as well as how much capital investment the business anticipates making. The participating businesses must also provide an estimate of how many employees will be hired. However, state officials have stressed these are all estimated amounts.
The entire program cries out for legislative attention. Yet the problems in the program were identified publicly in 2009 by the administering department, which tightened the rules where the department had the power to do so. Nothing was done by lawmakers.
We would suggest that this is a program ripe for a suspension by lawmakers, so that the state can look anew at the concept of enterprise zones. With substantial tax breaks available for companies under other laws, particularly the Quality Jobs program that is based on higher-paying jobs with benefits, the need for enterprise zone breaks may well be past.
If it is kept, lawmakers and economic development officials could look at ways to avoid the pitfalls in existing law. The original intent of enterprise zones, a popular idea across the country several decades ago, was to reward businesses for locating in distressed areas. Louisiana’s loopholes have made that objective almost unnecessary for employers to tap the Treasury. A new focus on breaks actually helping poor people would be welcome.
A special legislative panel is now looking at Louisiana’s massive array of tax breaks. Surely, the panel members could at least prod their colleagues in House and Senate to grapple with deficiencies in the law for Enterprise Zone tax breaks.