Changes to Louisiana’s process for approving industrial tax exemptions have led to annual revenue increases for schools, law enforcement and other local services to the tune of hundreds of millions of dollars, a new economic study concluded.
The report released this month by the Institute of Energy Economics and Financial Analysis (IEFFA) found that the 2016 reforms resulting from two of the Gov. John Bel Edwards’ executive orders led to a boost in 2021 local services of $282 million. The reforms also received support from the advocacy group Together Louisiana.
The reforms altered the approval system for state property tax exemptions to industrial properties. Louisiana’s Industrial Tax Exemption Program (ITEP) aimed to help attract new industry to the state, but it has also been criticized as a form of corporate welfare.
Edwards changed the way the exemptions were divvied up, requiring commitments to job creation and giving local government agencies a say on whether the removal of properties from property tax rolls would be approved.
A total of $17 billion worth of industrial property has been restored to the tax rolls as a result of the reforms, according to the IEFFA report, even as capital investment shot up 50% in the years after the reforms were put in place. In 2021, schools received $113 million, law enforcement $55 million and other parish services $115 million in additional funds as a result of the ITEP changes, the study found.
“The percentage of industrial property that was actually taxed, as opposed to exempted, increased from 37% in 2016 to 50% in 2021, averaged across parishes,” the study stated.
In the wake of the reforms, exemption applications shifted toward new facilities rather than expansions of existing facilities, according to the report. And most projects whose exemption applications were rejected by local governments went forward in some form, suggesting that the tax breaks were not deal breakers, the study concluded.
“We have increased funding for local governments, public schools and law enforcement by more than $750 million,” Edwards said in a statement emailed to the Louisiana Record. “And we’ve done it all while more than doubling the number and value of ITEP projects in Louisiana compared to the 2012-2016 gubernatorial term, from $50 billion in investment over four years to more than $100 billion.”