Like tax havens in the Caribbean, property classifications allow often wealthy landowners to dodge their fair share.
In the recent annals of irony, few stand out more than the genesis for this week’s cover story about Lafayette landowners skirting what is arguably their fair share of taxes: the TEA Party of Lafayette, TEA being an acronym for “taxed enough already.”
In his zeal to derail the creation of a tax increment financing district on Kaliste Saloom Road that would have helped wealthy developer Glenn Stewart, a retired medical doctor, bankroll his upscale Parc Lafayette retail center, TPL committee member Jeremiah Supple did some digging in parish records. Supple wanted to know, among other things, how much Stewart was paying in property taxes for what is some of the most high profile, desirable commercial acreage in Lafayette. Not much, it turns out. In fact, you’d pay more for a couple of Cajun Executioners and a pitcher of Budweiser at Dean-O’s than Stewart was paying per year in property taxes.
This is a topic that had been flashing on our radar for some time. Given Stewart’s very public spat with the TPL at that Feb. 23 town hall meeting and the general brouhaha generated by Parc Lafayette, it became a timely if overdue subject for these pages.
This is about good intentions — a law to protect farmers from an undue tax burden — that have been exploited by the affluent. It’s about some of Lafayette’s most prosperous letting the rest of us shoulder a greater share for funding our schools, our sheriff’s department, our jail, our court system and public works.
This isn’t class warfare. The rich won a long time ago. Uncle.
But it is about fairness, about paying one’s due. Or not.
The good doc did nothing wrong by the book. He took advantage of the law of unintended consequences.
After he purchased the land the property tax converted to the much more expensive “fair market” commercial rate, which for those primo 13.5 acres would be about $48,000 annually.
But state law allowed him to apply to get it reverted to agriculture, and evidently such applications are routinely approved. In most cases, as best we can tell, a landowner need simply have a bale or two of hay on the land for it to be considered ag. A bale of hay. In the two years he has owned the land, Stewart paid $84 dollars in property taxes. Were he paying the commercial rate for the land — and he paid above what is deemed the fair market value for the property itself — the city and parish would have collected $96,000.
That’s $96K that would have otherwise gone into city and parish coffers to fund the imperatives of government. Imagine all the effete, homoerotic, modern dance productions that would have underwritten at the Acadiana Center for the Arts. Or police and firefighter salaries. Or bridge repairs.
And it’s just the tip of the proverbial iceberg. There are more than 4,000 acres of “ag” property within the city of Lafayette alone. We weren’t able to check ’em all out, but we have a pretty good hunch some have no agricultural application. Ain’t nothing growing or grazing on them. Nothing but weeds, acres and acres of ’em. And much of this land is owned by some of Lafayette’s most prominent families who, in large part because their tax burden amounts to pocket change, are just sitting on the land waiting for an offer.
Yes, it’s their land and they can do what they damn well please with it. But were they paying fair market taxes on the land, it likely would have been developed long ago.
Because holding onto the land is so cheap, these land owners can turn down fair market offers and wait for a Glenn Stewart to come along. That land on Kaliste Saloom being developed into Parc Lafayette is worth, according to Assessor Conrad Comeaux, $8 per square foot. Stewart paid $12 — a 50 percent markup. But if Parc Lafayette goes as planned, he could make a fortune on it.
Once commercial and residential development surround a parcel of land that long ago stopped being used for agriculture — real agriculture — it should be reclassified. Maybe not to commercial, perhaps to some interim classification that might help move it into commerce.
Allowing those landowners to drop a pile of hay on it and call it a farm deprives our city and parish of millions of dollars in revenue.
That's what I'm talking about! I sure wish you'da looked up what the Salooms' taxes have been, are, on all that farm land. And there are big oil men who own acres & acres in "Upper Lafayette" who's property has been worth millions since those new roads have gone thru. In fact, check out that land Halliburton is gonna be sitting on... how much tax was paid on land up there in the past 10 yrs??? But this is a very interesting point you bring to light. Some of Lafayette's finest paying so little.... Uncle.
... written by Craig , April 06, 2011 - 12:07 pm
I agree that everyone should pay their fair share of taxes, but instead of targeting wealthy landowners for LEGALLY taking advantage of a tax loophole, we should be looking to our state legislators for continuing to support this ambiguous law in the first place.
... written by Mike Hinson , April 06, 2011 - 12:46 pm
Craig nails it.
It's not just rich people who take advantage of an obviously flawed law, but the same people who would take advantage of any tax saving thrown their face.
Legislators should be held accountable. Unfortunately, I bet there are a significant number of those Legislators, their family or their friends who use that tax break.
... written by Unempirical Observer , April 06, 2011 - 04:05 pm
I wonder again how much the city paid for that "agricultural" land in order to run Cammellia Blvd through there. We had to pay for it as I recall, it was no donation. Meanwhile the landholder saw their access and value go up and we all paid for it, a necessity, but we shoulda been cut a deal on helping develop that property into commercial access and we should be eligible for tax receipts now! Real agriculture should be exempted. We should be encouraging agro/gardening activity in the local area and this should be part of the city/regional plan.
... written by Gaius Cilnius Maecenas , April 06, 2011 - 04:15 pm
Walter, a wonderful article. Written without animus. It does highlight the general incompetence of property tax laws in Louisiana generally, Lafayette specifically. However, would not any of us do the same thing, if we did, indeed, own these parcels of properties?
Your appealment to a moral sentiment is timely! There is a growing consciousness among economists to develop the "moral" portion of the Science of Economics. After all, Adam Smith did write his three volume treatise on moral feeling before he wrote his 'Wealth of Nations' treatise. Thanks for the insight, Walter.
... written by IANDT , April 06, 2011 - 04:19 pm
What exactly is Mr. Supple's position? Is he saying that Dr.Stewart has in fact not been Taxed Enough Already. Most of what he seems to philosophically subscribe is predicated on the position that all taxation is inherently bad. If that is the case, does Mr.Supple feel that the ends (Dr.Stewart's negligible tax rate) justifies the means(Dr. Stewart's agricultural exemption). Is it really a matter of Mr.Supple just wanting to make sure that if he has to suffer from excessive taxation, Dr. Stewart should as well? If we were waging a war on hunger and advanced this position it would dictate that if we could find a way to feed 2/3's of the hungry children in the Parish we should not because it would be unfair to the 1/3 who could not be fed.Mr Supple, in his usual convoluted and eliptical style of argument wants the powers that be (read:the government)to ensure and inforce his position that DR. Stewart is not in fact Taxed Enough Already and should be Taxed More Already.
Or so it would seem.
... written by Gaius Cilnius Maecenas , April 06, 2011 - 04:42 pm
In my posting above to Walter on his fine article, I had alluded to the growing consciousness of moral feeling amongst Economists. Here I wish to validate this claim for the more reflective readers of THE IND. Professor George F. DeMartino [University of Denver] in his recently released book, "The Economist's Oath: On the Need for and Content of Professional Economic Ethics" (2011) 264 pp.; one cannot get more timely than this as Walter's essay demonstrates.
... written by Tax , April 06, 2011 - 05:11 pm
Maybe we should tax Renters in rental property a flat 5% of their monthly rent and then the property owner would be happy and Joey would be happy. Better than a T I F
... written by Soop. , April 06, 2011 - 06:18 pm
To anyone who thinks tax breaks do not drive the location of business, just look at the newly created movie industry in Louisiana. That was entirely created by the Legislature offering tax breaks for making movies in Louisiana. And it helped that I am sure that there were people in a few other states that just didn't "believe" in giving tax breaks to the movie industry. To them, I say thanks.
Having said that, it does upset me that this is "how it works." But as long as other states play by those rules, we don't have much of a choice -- we can sit on the sideline and pout or suit up and make our best pitch. I'm for making our best pitch.
All the best,
Soop
... written by Tim Supple , April 06, 2011 - 11:11 pm
Soop: you are right, tax breaks do drive the location of business. that's the point the author is making. Hay fields, rather than businesses, in the middle of Lafayette is a direct result of that policy.
As to the movie business. Looks good, but in fact every study has shown the cost (tax credit ($160 million in 2010) is greater than the "economic value" (taxes collected). so last year, its cost,(that's negative income even after all the "economic impact" smoke and mirrors)the state lost some $100 million.
... written by Gaius Cilnius Maecenas , April 06, 2011 - 11:33 pm
Tim Supple, I am not sure that you make sense. Can you more carefully articulate your reasoning. How did the State of Louisiana lose $100 Million?
The reason I am asking this is that I attended a meeting with all the big-shots many years ago [I still carry Mitch J. Landrieu's "State of Louisiana Lieutenant Governor" business card in my wallet] about this matter. At that time they wanted to give a 7% or 10% tax break (I think 7%), and I stood up at the well-attended meeting, and said, don't even bother giving any tax break, unless it is at least 15%. I had based this on comparative economic papers I had read about what works. To my knowledge this is what the group did.
P.S. Mitch told me to give him a call when he gave me his business card. Needless to say, I never did! I have found that politicians only advance their family interests, not the interests of others! I did not waste my time.
... written by Tim supple , April 07, 2011 - 01:46 am
Well CCM it's really this simple. La. give film companines 35% tax credit on salaries and 25% on everything else they spend. So say the average is 30% tax credit. If they spend $1 million, we give them a tax credit of $300,000, which, since they don't reside here and the films are distrubted from non-income tax states or counties, there are no profits to tax. So they sell the $300,000 tax credit for say 85% of that value to a, say La. Business that was going to pay that to the state in income tax. That a 15% return in to the buyer. So the state is out the $300,000 not paid by the business buying the tax credit. What La. gets back is about 3% income tax from the workers salaries, and 4% state and about 4% local sales tax. But let’s use a high number of 8% total sales tax. So 8% of $1 million spent is $80,000. $300,000 tax credit - $80,000 tax collected leaves the state negative about $220,000. We are not going to make it up on volume. The Legislative auditor’s office say we lose about about 18 cents on every dollar they spend or 74 cents on every dollar of tax credit. Just not going to make it up on volume.
... written by Robert Guercio - UL Alumni , April 07, 2011 - 10:38 am
So, is the tea party against not only Excessive taxes but also excessive tax breaks?
... written by ragin_cajun , April 07, 2011 - 12:32 pm
That's a great question Robert. I think you should attend their meetings and find out, then report back to us so we'll all know. Better yet, since it's almost election time, perhaps the pros at the Ind should do a little Q & A with the TEA Party and nail down just where they stand on all these things. I think MANY of us could use a healthy dose of facts about this group since they'll probably play a role in local and state elections this year, and their positions on issues are not clearly understood by the public at large, the commenters here, or even the reporters here. It'd be a real shame for the Ind to get scooped by Gannett on a local story like this.
... written by Gaius Cilnius Maecenas , April 07, 2011 - 02:12 pm
Tim, You made a valiant effort to explain your thesis of $100 Million loss to the State Treasury, but could you pare your explanation down so it is mathematically understandable. Elicit for our minds what your controling assumptions are, what numerical values you are plugging in, and how tax credits actually undermine or hurt our local/state economy. Thanks. PS: Its GCM.
... written by South of I-10 , April 07, 2011 - 03:33 pm
"That’s $96K that would have otherwise gone into city and parish coffers to fund the imperatives of government. Imagine all the effete, homoerotic, modern dance productions that would have underwritten at the Acadiana Center for the Arts."
Hilarious Walter!
... written by ragin_cajun , April 07, 2011 - 03:58 pm
I thought he was dead serious.
... written by Grateful , April 07, 2011 - 05:56 pm
Thank you Jermiah for asking the correct question. Although Walter says the topic of property taxes "had been flashing on his radar screen for some time", it is great that the topic is on the front burner. With government in a financial crisis it is time to close "loop holes" that allow property owners to skip out from carrying their fair load. Please stay involved in our community and issues that benefit all citizens. Grateful Reader
... written by Gaius Cilnius Maecenas , April 07, 2011 - 06:32 pm
I would have thought that South of I-10 above would have drawn attention to Walter's grammatical error: "...that would have underwritten at..." It should read: "...that would have been underwritten by..." The verbal structure is conditional [optative] present perfect passive.
I use to agree with Walter that dancers were effete. That was until I took two courses in dancing at the university in my late 20's. There is nothing effete about dancers. It improved my athleticism (it was a football coach that told me about taking a course in dancing to improve my bodily strength and dexterity, why I took these courses); my poise and my self-confidence in public gatherings. It was a great experience! About the 'homoerotic'---Right on Walter!
... written by Tim supple , April 07, 2011 - 11:40 pm
CCM: hope this helps. The are not exact amounts they are the most current estimates for 2010 I can find. But close to 2009
$500,000,000 spend on making movies X 30% tax credit (avg. of 35% salaries and 25% other) 160,000,000 tax credit (amount of credit to income taxes)
500,000,000 spent on making movies X 8% sales tax collected by state $40,000,000 colleted
160,000,000 tax credit (money not paid in state income tax) -40,000,000 paid in sales taxes
$110,000,000 difference
Note: I use the higher of the sales tax 8% rather than income tax 3%, just to be conservative.
hope it helps. but if you google film tax credits, you will see many reports. Both from conservative and liberal media. all say the same thing. I have only found 1 study commissioned by the La film companies that shows anything positive.
... written by Gaius Cilnius Maecenas , April 08, 2011 - 12:39 am
Thanks Tim! This clarifies the monetary situation. Would I be correct in the following observation: They actually do NOT take cash out of the State Treasury, they merely do not paid their dues into the State Treasury [What they would be obligated to pay, if they did not have tax credits.] 35% Tax Credit seems very generous; we should have more of a mature film industry in Louisiana at that rate. I will have to check in with the brilliant young man running Joey's Lafayette Entertainment Initiative [LEI], John Petersen, to gather more of a feel for these matters. I have been out of the loop for five or more years! Thanks for your labors here!
... written by NORTHSIDIAN SHOTGUN , April 08, 2011 - 12:51 am
What a show of backsides, do you couillions really think that you have anyones ear, I'd like to know how many of you were ever in a front line defending this nation, insuring that the political leaders could have the freedom to continue to break you like a double barrel. everyoneone wants the freedom to mouth their insidious little opinions but when nit comes to have earned that right, I'd say maybe two out of all the posters above ever even put on a cub scout uniform, hah what a bunch of MOFO'S, especially the hot air one now full of gas, "Beware Walter, GCM, is sidling up to you, he may duck
... written by Soop. , April 08, 2011 - 11:42 am
Tim ... here is the flaw in your reasoning. You assume the state would have collected $160M in taxes IF the movies had still come to the state without the tax credit. Here is how the analysis should have gone:
Pre Tax Credit - taxes to the state = $0 Post Tax Credit - taxes to the state = $40,000,000.00
Again, if you assume the movie industry was going to rush to Louisiana anyway, then yes ... the state lost money by giving a tax break. But I don't think anyone can rationally look at the facts and say that was going to happen.
The tax incentives lured the industry here pure and simple. And the state is $40M richer (and a lot of people have jobs) because of it.
Glad you "explained" it so we could all "see."
All the best,
Soop
... written by Gaius Cilnius Maecenas , April 08, 2011 - 03:30 pm
Thanks Soop! But notice it took Tim's re-statement to clarify the situation; thus permitting your unimpeachable evidence to emerge. But let us all pay attention to the anal Hate Merchant, NORTHSIDIAN SHOTGUN. His claim to fame is that he learned how to shoot a gun and kill people! Our lucid observations are dismissed as "insidious." Furthermore, he attacks our sexual identity! Isn't he a creature made in hell! He must have been unloved by his mother in childhood. He is missing his hormones vasopressin & oxytocin!
... written by Tim Supple , April 08, 2011 - 05:59 pm
soop: you would be correct "if" the film tax credits were to offset the income tax of the film company receiving them. But if you check you will see that the film companies do not distribute from our state and therefore neither owe or pay income taxes to La. What they do is they take their profits (film distribution and sales) in states or countries with little or no income tax. So what do they do with the $40,000,000 tax credit? Sell it to another business in La. that OWES the state income taxes. The market rate(yes there is an active market for that "commodity") is that you can buy it for 85% of its value. So Exxon refinery (I hear they are a big buyer)owes the state $40,000,000 in income tax, but pays the film companies $34,000,000 and uses that tax credit to offset the $40,000,000 they owe the state. And no the film company doesn't owe the state the money back.
GCM: hope this answers your question about "They actually do NOT take cash out of the State Treasury". The answer is yes they do.
For more detail go to :
http://www.fbtfilm.com/buying_tax_credits.aspx
be glad for you to come by and I can pull it all up on the internet.
... written by Titus Pomponius Atticus , April 08, 2011 - 10:53 pm
If I may jump in here for Maecenas, Tim & Soop. I actually do possess a mathematical training. Can you quantify what cash these film industries actually do spend in Louisiana to produce their films? Tim what you have told Maecenas, my friend, and Soop is merely business. There is no obligation for business to pay taxes, unless they are forced to pay taxes! Our legislators are very generous with those donors who fund their political careers. Given this tax loop-hole mentality (How else do we feed tax lawyers?) where is the damage to outer society? I would be curious in your lucid evidence-driven statements here, Tim. I will naturally check out your link to us. Thank you for your urbanity in regard to these matters.
... written by Titus Pomponius Atticus , April 09, 2011 - 02:17 am
Tim, I must rdraw back my observations above after reading your sensible, sober observations on land property tax abuses here regionally. Your high moral nature impresses me. MY friend Maecenas was too stupid to understand the depth of your business insights. I will correct his faulty judgment.
... written by Tim supple , April 09, 2011 - 02:58 am
TPA: I must admit I do not possess mathematical training beyond a business acumen. So when you suggest I am only looking the film tax credit program from a business perspective, you are correct. However, if I understand your question, the damage to our society is that we are paying business (film companies) to employ citizens at a greater cost then the benefits received. Run this policy out to its logical conclusion. If the state loses money $100,000,000 million on the $500,000,000 spent by them, how much would we lose if they spent $1 billion? The mathematical formula would show you we would lose over to $200,000,000. The more they spend, the more we lose. So the harm is we would have over $200,000,000 million net loss in the receipts to the treasury, which means we have to cut funding to something. Like education?
I am all for what makes sense. I have no ax to grind with the film industry. As a matter of fact, I take advantage of the film tax credits to fairly substantial degree. So like the property tax exemption for agricultural lands, I thank you for my subsidy. I just telling you, from 1st hand experience, its bad public policy. In the end it will bankrupt the state. Well actually, it already has.
... written by NORTHSIDIAN SHOTGUN , April 10, 2011 - 05:28 pm
Those Businesses which have negotiated tax exemptions and tax reductions on their businesses are " LIFE-TIME PAID UP MEMBERS OF JOEY'S POLITICAL CAREER. Birds of a feather "duck together.
... written by Leslie Turk , April 11, 2011 - 11:37 pm
ragin_cajun, you'll notice i removed your comment because your information is incorrect. Please stick to the facts when naming specific companies or individuals. And generalize your comments when expressing your opinion.
... written by The Original Northsidian , April 12, 2011 - 12:41 am
The rich get richer!! The poor get poorer!! And, the REVOLUTION WILL NOT BE TELEVISED!!
... written by ragin_cajun , April 12, 2011 - 01:39 am
i'm not sure what you mean...but, okay....I'll pay even CLOSER attention to facts in the future. I think I've always been very attentive to facts in my writing here, and I've often provided links to information to support my position here. I'm surprised to hear i'm the problem in that department on these boards, I have to say. But hey, you asked for it, you got it... :)
... written by NORTHSIDIAN SHOTGUN , April 12, 2011 - 04:06 am
Congrats maceaneas you connected, apparently.
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