By: Brian Housewright
About a month ago, the Baton Rouge Advocate ran a series titled “Giving Away Louisiana”. It was an eight part series that focused on the various tax incentives and credits given to various businesses, and industries in order to lure companies to our great state and to boost employment. Gordon Russell, was one of the main contributors to the series and unveiled some interesting data and information. It is a perfect series of articles for the “government first” crowd that can add fuel to the fire of Crony-Capitalism. However, I must add, it does put a “burr” under the saddle of some conservatives as well. I will touch on that later.
From a true Capitalist’s perspective, there are some key fundamental issues I have with the philosophy and “spirit” of the articles. I am still unclear on the one major point of the series: is the LA treasury actually cutting checks, of our tax dollars to companies and businesses to help them with capital, labor, inventory etc. purchases, in order to get established, or is the State issuing true tax credits/incentives? Meaning, that the newly courted business/industry gets a percentage discount on paying taxes, a deferment on paying taxes, or a total exemption, if they choose to do business in the state. When you read the title “Giving Away Louisiana”, one gets the impression that the State is actually taking money out of the tax payers wallet and giving it to certain industries and businesses.
The Liberal mantra, when it comes to taxes, likes to flip the language to where when tax cuts, credits, or incentives are enacted, the tax payer is being robbed or screwed out of their own money. In reality, it is the government programs that are going to recognize a short-fall in revenue, not the individual tax-payer. When it comes to tax credits/incentives for businesses, the state is not going to dip into the tax-payer’s bank accounts, affect their personal income, have them take a pay-cut, steal from their 401k, or search under everyone’s mattress to get cash in order to lure a business into LA.
Now, for the “burr” under saddle for conservatives. The true Capitalist believes that all businesses need to be treated equally, whether that relates to regulations or with tax credits and incentives. The state should not play favorites to certain industries, companies or businesses (See Solyndra, GM, etc.) based on environmental, labor unions, job protection, trade etc. The LA tax credit and incentive program for certain industries and companies (Film industry, Walmart) does play favoritism, and unfortunately, these “good” intentions fan the flames of Crony-Capitalism, which the true Capitalist is against. We want the free exchange of goods and services, in a true competitive market, between consenting individuals or businesses, with as little government “foot-print” as possible.
So….What is a state like Louisiana supposed to do? How do we get businesses and certain industries into our state for high level job creation? How do we keep our best and brightest in the state? How do we secure entry level jobs for the young and poor, so they can wean themselves from government dependency? Here is a brutal fact: Louisiana is next to last in education, crime and poverty. The labor market for skilled, technical and college educated workers is thin at best. The best thing going for us is the Mississippi river and all of the connected water-ways (Infrastructure). Most residents and working Americans, want to be employed, with the hopes of upward mobility. How do we bring businesses, companies, start-ups, and desirable industries to a state with a dismal record for education, crime and poverty? Here is another brutal fact: Companies need a labor force. They need to have high level workers in management, design, research, etc. What normal person wants to move to a state with the unfavorable stats we have related to education, crime and poverty?
If we can’t fix our dismal record related to education (number one issue), crime and poverty, then the next best way to lure industry and business to LA, is to offer tax credits and incentives. The liberals are going to scream that all of these key government programs are going to lose their revenue stream, get cut, or lo and behold, “go out of business”. In my life-time, none of these “programs” have solved the problem of poor education, crime and poverty. Maybe all of these new companies, industries and businesses will eventually invest into the needs of this state and it’s residents to build a decent workforce, just like the State has invested in them.
In the next article (Part II), I will cover the tax incentives and credits related to Enterprise Zones.