Thursday, July 18, 2024

Waguespack: What exactly is the ITEP endgame here?

by BIZ. Staff

A key question is starting to become harder to ignore in Louisiana… and it has everything to do with the latest in what is becoming a long list of tax controversies created in the last few years.

No, I am not referring to the numerous tax special sessions… or the more than $7 billion that was raised during those efforts… or the administration’s stated refusal to refund a new state income tax recently declared unconstitutional by the Louisiana Supreme Court… or the likely soon-to-be declared unconstitutional sales tax collection system that is an audit minefield and an extreme outlier to other states… or even the previously failed proposal by the governor to implement a Commercial Activity Tax (CAT) that would have put huge burdens on Louisiana small businesses. Nope, not talking about any of that stuff.

The current question that needs an answer is what exactly is the governor’s endgame on the Industrial Tax Exemption Program (ITEP) and what impact will that answer have on our economy? While this question of economic impact doesn’t seem interesting to most in the media covering this issue, it sure is the top question heavily pondered by those trying their best to provide jobs in Louisiana.

Last time I checked, a job is considered a good thing. That is still true, right? I sure hope so. Especially manufacturing jobs. They have been the backbone of Louisiana’s economy for generations.

Manufacturing jobs are some of the best jobs we have. More than 130,000 Louisianans work in manufacturing, earning an average salary of $87,212 – which is more than double the state average. Even better, these jobs depend on a multitude of other jobs to be successful thanks to manufacturing’s need for raw products and services from other industries to work. For example, looking just at the petrochemical manufacturing industry, the multiplier effect is considered to be 6.10 per job. That level of ripple effect far exceeds the multiplier of other industries.

Besides the obvious impact on those employed in manufacturing, the parishes that house these facilities see greater benefits also. Parishes with the largest manufacturing presence and the highest utilization of the ITEP are among the most prosperous in Louisiana. The top dozen parishes with ITEP contracts are all above the average annual wage for the entire parish. All but one of them have higher property and sales tax collections per capita. Teacher pay in these parishes is generally higher than other parts of the state thanks to all these increased tax collections that usually come with high-paying, private sector jobs.

Of course, these numbers mean very little to the unions, blogs and leftist groups that have made it a mission to eliminate the ITEP, disparage the companies that have used it and falsely sell togetherness while peddling heavy doses of divisive tactics in communities across our state.

This problem resulted from an executive order issued by Governor Edwards in 2016 and amended in 2018 to eliminate the ITEP (that was first enacted in 1936 and enshrined in the state Constitution back in 1974) and replace this historic economic development tool with chaos and confusion. Today’s ITEP still has a state exemption formula and approval process (albeit reduced and more cumbersome) but also now adds uncertain, sporadic and often undefinable local approval processes without clear direction. Companies now have trouble understanding these ever-changing rules and procedures and local governmental entities are left to scramble and figure out how best to bring order to a complicated political powder keg that just happens to sit atop the most critical tool for the state’s economic future.

Confused? Welcome to the club.

This confusion and chaos are beginning to erode our business climate and we really need the governor to step in and lead on this issue. Just this past week, three different manufacturers in the Greater Baton Rouge area shut down operations, impacting 1,000 direct jobs and many other indirect jobs. Over the last two years, applications for ITEP manufacturing projects have dropped considerably, meaning our job pipeline is drying up. We need these jobs today just as much as we always have and the clarity and consistency in the ITEP he can provide with specific leadership is needed now to make this happen.

This day has been coming for quite some time now. When the governor drafted the executive order to do away with ITEP as we have always known it, he also inherited the burden of replacing it with a workable solution. If you didn’t like the old one then, as governor, you have the best bully pulpit to clearly articulate a vision for the new one. This long-sought workable solution is still to this day nowhere to be found and that must change. We can’t afford to lose any more of these manufacturing jobs and we can’t wait much longer to start refilling the pipeline with new manufacturing investments.

Why the big deal? These manufacturing jobs pay very well, don’t usually require a four-year degree, have tremendous ripple effects in our economy and lead to higher tax collections and teacher pay in the parishes where they are located. These are all good things that serve as the foundation for economic opportunity for our people. We should want to celebrate and encourage these types of jobs rather than denigrate and discourage them. It should be a no brainer.

We need some peace and stability on this ITEP issue. The anti-business crowd has had their fun the last few years, but it is long past time for them to cool their jets. If we truly want Louisiana to be together, the divisive and toxic anti-business culture that is growing in our great state must stop. We desperately need the governor to finally let us all know what his endgame is on this issue. For all those earning a great salary in manufacturing, I sure hope his endgame is a good one.

Stephen Waguespack is president of the Louisiana Association of Business and Industry (LABI)

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