The LABI Report: A small manufacturer speaks

Published 12:00 am Thursday, January 24, 2002


Each day at work, he looks out at an empty field and sees his future.

Don Begneaud has a vision … a dream … or maybe an obsession.

He has a highly successful small manufacturing company, but in his mind he can see a state-of-the-art facility on the seven acres of undeveloped land that he owns next to Begneaud Manufacturing, Inc. in Lafayette.

One day he will realize that dream, but it may be in Texas instead of Louisiana.

Business leaders, economists and economic developers have continually pointed to two major disincentives in our tax code that place Louisiana businesses at a competitive disadvantage when compared to our neighboring states. Louisiana’s imposition of sales-and-use taxes on business machinery and equipment, and our inclusion of debt in the base of the corporate franchise tax, are two strikes against us in economic development wars.

But no economist or economic developer could explain the problem as well as Don Begneaud did recently at the Louisiana Association of Business and Industry’s annual meeting.

Begneaud’s story is vintage Horatio Alger. He began welding in high school, selling his metal sculptures at art shows.

As he grew a bit older, the exploding oil industry in south Louisiana brought him a handsome income as a commercial welder.

When he enrolled in Industrial Arts at his local university, his oil-patch customers refused to let him quit. He hired a part-time worker to fill in for him.

While Don rode his bicycle to school, his employee took the truck on welding jobs – and the evolution of Begneaud Manufacturing began.

Instinctively, Begneaud knew that state-of-the-art machinery was the key to quality and efficiency in manufacturing.

Over a decade ago, he acquired his first shop space and borrowed money from his father for his first piece of machinery.

Don soon began discussing the addition of more machinery with his CPA who told him he was foolish for even considering such a notion. Don bought the machines – and fired the CPA.

During the mid 1990s, Don’s business was expanding, his workforce and payrolls were growing, and his critical purchases of machinery were increasing the productivity and profitability of his company.

Unfortunately, Don ran into the two biggest disincentives for new or expanding businesses in Louisiana.

All of Begneaud’s machinery was purchased out of state, most of it in Germany. He never dreamed any taxes were owed on these purchases, but an audit by his local government brought him into painful contact with Louisiana’s use tax.

He had to pay a hefty amount of unforeseen taxes – taxes his competitors in Texas did not pay.

But the bad news was not over for Don.

He was also introduced to the fact that only two states in the nation include debt in the base of the corporate franchise tax, and Louisiana is one of them.

When Begneaud Manufacturing borrowed money for the purchase of machinery that cost $1 million, the company actually had to pay $83,000 more due to the sales and franchise taxes.

The purchase of the same machine in almost any other state would not be taxed.

Begneaud has become the most eloquent voice crying out against Louisiana’s ridiculous policy of taxing the debt and equipment of companies attempting to expand or locate in Louisiana.

He is rallying small business owners in every part of the state to speak out against these anti-economic development policies that are a part of the reason good-paying jobs are leaving Louisiana.

The seven acres of raw land still hold Don Begneaud’s dream for his state-of-the-art manufacturing facility.

But he recently has filed a corporate charter in Texas. Louisiana’s tax disincentives may force him to locate in a state which taxes profits, not dreams.

DON JUNEAU is the president of the Louisiana Association of Business and Industry.