A recent analysis of the Louisiana Department of Revenue’s Corporate Income and Franchise Tax and Individual Income Tax credits finds such credits extended as an incentive to lure corporations and industries into the state result in a major reduction in overall revenue (read, tax) collection by the state. Moreover, because state law does not require agencies that administer such credits and exemptions to track and report their return on investment, it’s difficult to determine the economic benefit to the state accrued by such credits.
In its executive summary of the 10-page report, the Louisiana Legislative Auditor’s office provides an overview of the programs and their impact on revenue:
As of February 2011, the state has a total of 464 tax credits and other exemptions that were enacted by individual statutes.
The amount of CIFT credits claimed during tax years 2005 through 2010 resulted in a tax liability reduction of approximately $3 billion out of a total tax liability of $5.4 billion, an average revenue loss of approximately 55% due to CIFT credits. The amount of IIT credits claimed during tax years 2005 through 2010 resulted in a tax
liability reduction of approximately $1.8 billion out of a total tax liability of $16.5 billion, an average revenue loss of approximately 11% due to IIT credits. This money may have been eligible for collection as tax revenue by LDR if these tax credits did not exist.
While determining the average amount of state revenue lost due to CIFT credits and IIT credits, we found that state law does not require agencies that administer tax credits and other exemptions to track and report their return on investment. As a result, it is difficult to determine the overall impact of CIFT and IIT tax credits on Louisiana. In addition, we identified four CIFT credits where only a few entities claimed a significant portion (greater than 50%) of the tax credit.
The Louisiana Budget Project, an offshoot of the Louisiana Association of Nonprofit Organizations that tracks the impact of state fiscal and tax policy on Louisiana’s poor population, issued a statement on the Legislative Auditor’s analysis on Monday:
The report confirms that Louisiana’s tax code is riddled with costly loopholes benefitting a few big, profitable corporations at the expense of job-creating investments in education, transportation, public safety and other building blocks of a strong economy. We are heartened by Governor Jindal’s recent statement in support of ending subsidies and loopholes in the tax code. The Legislature should follow Governor Jindal’s lead by evaluating corporate tax breaks based on merit, and eliminate those that don’t produce results.
Read the Legislative Auditor's report here.