While Together Baton Rouge and industry-supporters are still arguing over whether the benefits of Louisiana’s Industrial Tax Exemption Program outweigh its financial impact on local government agencies, new research aims to answer whether financial incentives offered by states have a positive or negative impact on its budget, Governing reports.
Using data from the W.E. Upjohn Institute for Employment Research, researchers at North Carolina State University tallied all incentives offered by 32 states, including Louisiana, from 1990 to 2015, effectively covering 90% of incentives nationally. Most of the programs they looked at—investment tax credits, property tax abatements, and tax credits for research and development—were linked with worse overall fiscal health for the jurisdiction that enacted them.
“Ultimately, the results show that financial incentives negatively affect the overall fiscal health of a state,” researchers wrote in the report’s abstract.
Nationally, tax incentives as a share of state and local business taxes nearly tripled between 1990 and the early 2000s, according to Upjohn Institute research, and Louisiana ranks among the highest.
Measuring incentives as a percentage of the value added by a state’s industries, Louisiana is ranks fourth in the nation at 3.4%, below to New Mexico (4.5%), Iowa (3.8%) and New York (3.7%). Of the states studied, those relying most on financial incentives between 2013 and 2015 were Iowa, Louisiana, New Mexico, New York and Pennsylvania, according to the report.
In terms of weakened fiscal health, the state with the highest average ratio of expenses to revenues was Alabama, followed by Kentucky, Louisiana, Massachusetts and Pennsylvania. Nevada and Oregon, two states with especially strong economic growth in recent years, recorded the most favorable ratios.
