The LABI Report: In search of quality jobs

Published 12:00 am Saturday, April 20, 2002


The centerpiece of the Foster administration’s economic development package is the revamping of the Quality Jobs Act (QJA).

Currently, the QJA grants a 5 percent tax credit for qualified companies creating new payrolls of at least $1 million. Only about 30 applications for the QJA have ever been filed because the criteria are very difficult to meet.

The state’s economic developers courted the Foster administration to loosen the guidelines and reduce the $1 million payroll threshold to $250,000 so more businesses – and particularly small businesses – could apply. The jobs must be at least 1.5 times the minimum wage and employers must pay at least 50 percent of the employees’ health care benefits (a requirement that practically ensures higher wages, since low-wage jobs rarely have significant health care benefits associated with them).

So what has happened to the QJA legislation in the “economic development” Special Session?

The legislation was the last House bill to be heard on the House floor. (What a priority!)

It was not brought up until the very end of the session, and only after a separate bill to provide QJA benefits to the Charlotte Hornets professional basketball team cleared the Legislature.

Obviously, the Hornets deal, not the existing businesses in Louisiana, was the Foster administration’s priority.

The broad-based QJA bill was watered down in committee to raise the $250,000 qualifying threshold to $500,000. (Fortunately, the House amended the threshold back to $250,000 to give small businesses a chance to participate.)

The Foster administration’s lack of concern for the existing businesses and industries in Louisiana became even more obvious when it added an amendment in the House that severely restricts the classifications of companies eligible for the program.

For example, unless a business was one of a few “chosen” industries, or a manufacturer, or had at least 50 percent of its business consisting of a “multi-state, national, or international nature,” they could not qualify for the incentive. Administration floor leaders argued that the bill, as it left the House, would allow other ways for employers to qualify.

But one of the three criteria previously mentioned would still have to be met to even be eligible, and a business would then have to fit into one of a half-dozen other categories to actually qualify for benefits. Certain enterprises, such as retailers, were specifically excluded.

Why exclude any enterprise from receiving a 5 percent rebate on the creation of $250,000 in new payroll?

The administration argues that opening up the act to all businesses would be “too costly.” In fact, their floor leader, with no facts to back him up, said the state faced the loss of well over $100 million in revenue if his restrictions were not placed on the bill.

That allegation escapes logic. If the bill results in $1 billion in new payrolls being created, the 5 percent rebate would amount to $50 million.

But remember, what triggers the rebates is new taxable payrolls!

The average income tax the state would collect on the salaries would be approximately 3 percent.

So the actual “lost” revenue to the state would be around $20 million if $1 billion in new payrolls were created.

When the sales taxes and economic multiplier effect generated by the payrolls are considered, the $20 million “loss” evaporates. A payroll of $1 billion equates to 33,333 jobs at a salary of $30,000 per job!

Hornets? Saints?

They certainly would be valuable to have or to keep, but their value pales in comparison to what $1 billion in new payroll would do for Louisiana – and the $20 million in rebates is peanuts compared to the $200 million in taxpayer dollars going to the Saints and Hornets over the next few years.

It should not matter what classification or size a business must be to qualify for the QJA. If they are creating new payrolls of at least $250,000, they are making money for the state, not losing it.

Now that the Hornets and Saints have their deals done, perhaps the administration will have time to understand what will really create jobs in Louisiana.

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