Louisiana ponders whether it’s gone overboard
Louisiana Gov. John Bel Edwards recently announced $44 million in cuts to planned construction projects across the state, from road upgrades to playgrounds. It’s a familiar experience for Louisianans: The state has had to pull back drastically over the past eight years, as tax cuts and low oil prices have decimated government cash flows, due in part to the political aspirations of Edwards’ predecessor, Bobby Jindal.
In a series of special sessions over the past few months, Edwards worked with the Legislature to raise enough revenue to mostly plug a $2 billion hole. But the fiscal problems haven’t been solved: The budget was balanced with an increase to the sales tax that sunsets after two years, leaving Louisiana with the highest sales tax in the country. Meanwhile, the corporate income tax is low and collections are even lower, because of the number of exemption sand abatements companies have enjoyed without having to give much back in return.
That recent history of fiscal crisis and unpredictable taxation has made it even more difficult for a state with the third-highest poverty rate to create opportunities for its citizens, says Robert Eisenstadt, director of the Center for Business and Economic Research at the University of Louisiana at Monroe.
“I am not currently very optimistic or bullish onthe state’s economic fortunes,” Ei sen stadt says .“We can talk about workethic, and how much we love business and industry. But in the absence of a stable public environment, not least of whichis education, transportation and a labor force, those things are strained at best.”
After the fiscal crises of the past few years, many state leaders are beginning to rethink the role of tax breaks, and how best to compete with surrounding states for business—as well as to grow those that already exist.
“There’s starting to be a broad recognition that we might have given up too much in order to lure business,” says Jan Moller, director of the nonprofit Louisiana Budget Project. LYDIA DePILLIS