Tax incentives are one of the most controversial tools in the economic development tool kit.
Proponents, including economic development officials, business leaders, developers and industry executives, say without tax breaks, it wouldn’t make financial sense to do certain deals, build job-creating plants or revitalize old buildings.
Critics charge that most incentive programs give lucrative tax breaks to private industry and wealthy companies at the expense of tax rolls and the environment. They say the giveaways often haven’t paid for themselves and have mixed job results.
In 2023, Louisiana provided more than $500 million in tax incentives including $150 million to the Quality Jobs Program, $134 million to the Motion Picture Investor Tax Credit and $86 million to the Rehabilitation of Historic Structures Tax Credit, according to the Department of Revenue. The return on that investment depends on how you slice the numbers.
In this installment of One Big Question, an occasional feature where we pose the same question to experts with diverse perspectives, we ask: What have been the best economic development incentives in Louisiana, and what have been the worst?
The following answers have been edited for brevity.
Michael Hecht
President and CEO, Greater New Orleans, Inc.
Probably the best example of an incentive that I can think of is the historic tax credits that have allowed downtowns to be rebuilt — not just in New Orleans but across Louisiana and across the country — that otherwise would not have been economical to adaptively reuse, because that’s an incentive that definitively passes the “if-not-but-for” test, and the result is catalytic.
The enterprise zone tax credit, or the EZ program, is an example of an incentive that has not worked, because the income and franchise tax credits and the sales tax rebate was not significant enough to change behavior. And so it simply ended up incentivizing investment that would have happened already, and it did not catalyze new investment that was not financially viable otherwise.
Jan Moller
Executive director, Invest in Louisiana
The one that I think is the worst is really ITEP, the Industrial Tax Exemption Program. We have a nonelected state board giving away local property taxes with little to no input from the local citizens and elected officials, who are, in many cases, losing tens, if not hundreds of millions of dollars in tax revenue. We are literally giving tax breaks to companies that make investments that kill jobs.
I think the LED Fast Start program is one that is good, because it’s smaller, it’s customized and it’s focused on providing customized training and workforce development for specific needs. In general, the best economic development incentive that Louisiana or any state could have is an educated, high-quality workforce, strong reliable infrastructure, safe streets, good schools and the kind of communities where people want to move in.
Daniel Erspamer
CEO, Pelican Institute for Public Policy
We are generally skeptical of economic development programs that put the government in the position of picking winners and losers. However, in analysis of the existing programs, we would say the broadest base and most open opportunities are the best. And the best investments tend to be things like pre-site selection and efforts that are about identifying the best opportunities for businesses to come here.
The worst, I would say is likely the film tax credit. While it is certainly fun to have movies and TV shows filmed in our state — and they likely still would be — this is an incentive that has largely gone to out-of-state companies through the trading of these credits. And it’s hard to point to any long term, real economic impact on actual workers and citizens of Louisiana.
Patrick Button
Tulane University economics professor; Connolly Alexander Institute for Data Science executive director
One type of incentive that tends to work well is one that’s very targeted. It could be targeted toward some kind of barrier to being able to enter a market — that could be that you aren’t able to come up with a capital financing, or you’re a small business and you’re trying to manage the paperwork process, anything that can help with some of those barriers can allow people to enter a market when they otherwise wouldn’t be able to.
Less effective have been: most incentives in general. My research and other research tend to show that tax incentives to the film industry don’t tend to create a local film industry or lead to significant amounts of jobs. There’s similar research on, say, incentives for million-dollar plants to relocate. It tends to be the case that the only time that those incentives seem to matter might be at the final stage, where the business is deciding between two top places that they would have gone to anyway.
Susan Bourgeois
Secretary, Louisiana Economic Development
The good and the bad might be two sides of the same coin: our tax policy. Prior to November of last year, that was on the bad side. Businesses looked at that and both the complicated nature of our tax policy, and then the actual financial burden, was a real deterrent for companies growing, locating and expanding in Louisiana. We can do incentives all day long, but at the end of the day, you need to get the fundamentals and that’s a fundamental.
The flip side of that, for the good — and the statistics are bearing this out — is the changes that we made last November are moving us dramatically up the rankings, and rankings matter. We just moved from 29th to 10th in the country for corporate tax policy and favorability. At the end of the day, I always like to call our incentives sort of like a coupon at the end that pushes a deal over the line, but our tax policy gets us deals.