Landrieu: Extend Targeted Tax Cuts

Even as a brewing scandal unfolds surround the state's tax incentive program for on-location film-making, Louisiana Lieutenant Governor Mitch Landrieu says he wants to extend this approach to economic development into new areas:

Louisiana should take a cue from its successful film tax credit program and
target other areas that could boost the state’s cultural economy, Lt. Gov. Mitch
Landrieu said Monday.
The film tax credit program is an example of “a targeted tax policy” that is working to improve the cultural and economic climate in Louisiana, Landrieu told the Press Club of Baton Rouge. The film industry success is why Landrieu said his agency is pushing tax credits in other areas, such as, for artists, individuals in the food industry and historic preservation.

Targeted tax incentives can go wrong in two important ways. First, when competing jurisdictions start offering the same incentives, your own tax incentives suddenly lose their effectiveness. (And you can make a case that this is exactly what's happened with Louisiana's film incentives.) Second, each tiny little incentive erodes the state's tax base a tiny little bit. The more tax incentives you offer, the more the base erodes. And each bit of base erosion effectively shifts the cost of funding public services onto everyone else-- that is, except for the artists and filmmakers and "individuals in the food industry." In short, tax incentives are a zero-sum game, and the more you work to create winners, the more you are inevitably creating losers.

If Landrieu has his way, and Louisiana's film incentives turn out to be the vanguard of more comprehensive effort to provide tax breaks for everyone with an artistic bone in their bodies, the less-artistic among us will suddenly find that our Louisiana taxes are higher than they used to be-- and they'll have Landrieu's tax incentives to thank.

Times-Picayune: Stop Playing Santa With Local Government Revenue

As Louisiana lawmakers consider a number of different approaches to a temporary "sales tax holiday," the editorial board at the Times-Picayune has some sound advice for legislative tax writers: don't force local governments to foot the bill.

The board notes that the most prominent proposal, authored by Rep. Billy Montgomery, "would waive not only state taxes but also taxes collected by local governments for services ranging from schools to law enforcement." They continue:

Rep. Montgomery's proposal... would take away millions of dollars from municipalities and parishes across the state -- a decision that should be up to the governing bodies of those localities, not to the Legislature.
If this bill becomes law, the state would be dealing a particularly hard blow to local governments recovering from the 2005 hurricanes, which need every bit of revenue to rebuild infrastructure and provide services. This is why the city of New Orleans is opposing Rep. Montgomery's measure.
But even better-off localities would suffer. The Legislature would be taking away local revenues at the same time that proposed pay raises to public employees in Gov. Blanco's budget are poised to increase the operating costs of many local governments.

States enacting sales tax holidays usually don't force locals to follow suit-- and even then, there's virtual unanimity among tax policy analysts that they're bad tax policy, offering lawmakers a weekend's worth of good PR without offering meaningful tax cuts to the fixed-income families who are hit hardest by the sales tax. But Louisiana's "screw the locals" approach adds a whole new dimension to one of the most cynical tax "relief" ploys that has been dreamed up by tax-averse, PR-hungry lawmakers in recent years. Find out more about sales tax holidays in this ITEP policy brief.