The LABI Report: The special session’s paradox

Published 12:00 am Friday, April 5, 2002


Several months ago, the Foster administration announced plans for an “economic development” Special Session of the Legislature.

The need for more emphasis on economic development is obvious as evidenced by a steady stream of high-paying jobs leaving the state and tens of thousands of our most productive citizens following them.

Once the governor issued the agenda for the session, pundits and Capitol observers noted that genuine economic development proposals constituted only a small portion of the items for consideration.

A few new tax incentives for research and job creation have been proposed, and those bills – if enacted – will help Louisiana play “catch up” with other states to some extent. But nothing in the Special Session will address major areas in the tax code that place Louisiana businesses at a disadvantage with their competitors in other states.

One of the most egregious problems with the Special Session, however, is the inclusion of an item that will send another loud negative signal to the nation’s business community about Louisiana’s tax policy.

Governor Foster is using the “economic development” Special Session to allow another attempt to require a super majority (two-thirds) vote to reduce certain local taxes authorized by the state. Similar legislation has been debated on numerous occasions in the past and was defeated only by the narrowest of margins.

If the Legislature enacts the super majority vote requirement, Louisiana will become one of the few – if not the only state in the union – to mandate a two-thirds vote to reduce certain local taxes.

Once again, Louisiana would stand in lonely isolation in a key area of tax policy.

Consider some practical examples of why imposing the super majority vote for tax reductions would be bad for individuals as well as economic development.

For many years, state government has imposed sales taxes on food and utilities and has authorized local governments to do the same. Many economists and fiscal experts have called for a reduction of sales taxes – particularly on such mandatory purchases as food and utilities – and broadening the tax base in other areas as an offset.

Today, the Legislature could act to reduce local sales taxes on food and utilities with a simple majority vote. If the legislation introduced in the Special Session passes, it would require a nearly impossible two-thirds vote to succeed.

Interestingly, one of the targeted economic development incentives in the Special Session is a bill designed to remove state and local sales tax on customized computer software.

The imposition of this tax has negatively impacted our ability to attract certain technology enterprises to Louisiana.

Currently, the Legislature can remove this impediment to jobs and investment by a simple majority vote. If the proposed super majority vote was currently in place, the removal of this job-killing tax would be very much in doubt.

Unfortunately, economic development in Louisiana has a lot to do with overcoming image problems.

One of the major negatives for the Bayou State is the perception that our tax policies are arbitrary, capricious and anti-business. If Louisiana adopts a philosophy that it should be just as hard to reduce taxes as it is to raise them, we will send another clear message that government comes first, while the economy and taxpayers are of secondary importance.

All too often, our state officials bend over backwards to help government grow but do little to fuel growth in the source of government revenue – the state’s economy.

As long as that attitude endures, Louisiana will continue to be perceived as a risky place to do business.

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