Are Louisiana’s Billions in Business Tax Breaks Creating Jobs? Nobody Knows.

Recently, the Louisiana Legislative Auditor issued a report that found the cost of the corporate income and franchise tax credits for the state was a staggering $3 billion between 2005 and 2010. The total tax liability during that same time was just $5.4 billion, which means the state lost over half of its potential revenues because of these credits, but no one can show how the state benefitted.  In 2009, in fact, those credits were worth $685 million, which is about 78 percent of all taxes owed by businesses that year.  When 14 separate agencies are giving away three quarters of the state’s business tax revenue in a year and no one can say why, it’s a problem.

Not surprisingly, the Auditor recommends better monitoring of these costly incentives to determine if they are effective. Here’s a primer on why and how to measure business tax breaks’ impact. Because, when states do bother to track the economic effects of so-called incentives, they find the business lobby’s promise may not be fulfilled.

The Louisiana report goes on: “If the legislature is interested in the return on investment for the state’s tax credits and other exemptions, the legislature may wish to consider adding this [monitoring] requirement to state law and requiring the appropriate state entities to formally track and report this information.”

We suggest that the legislature do more than just consider increased monitoring and tracking and instead put those mechanisms in place immediately. Taxpayers have a right to know if their tax dollars are being spent effectively. As the Legislative Auditor Daryl Purpera said of the current system, “It is not good business practice. You’d think we’d be monitoring those funds as best we can.”

You’d think. In fact, Louisiana is one of the states in our Corporate Tax Dodging in the Fifty States report that has failed to enact a single one of six basic business tax reforms and is failing on key transparency measures that would make it easier for ordinary taxpayers to know the ways in which they are subsidizing corporations.