During the two special sessions this year, Louisiana lawmakers passed more than $1.5 billion in new taxes on top of the $720 million in new revenue approved during the 2015 regular session, notes Business Report Editor Stephanie Riegel in her latest column.
“That’s a lot of money, and yet it’s still not enough to enable the state to fully fund all of its obligations,” she writes. “It’s important to understand what’s going on because it’s not just a matter of government overspending, though some would like to paint it as such.”
The simple fact is that Louisiana’s economy and its overall tax base is shrinking, Riegel says.
Statewide employment numbers have been decreasing every month since August 2015, she notes, adding that the picture is pretty dismal outside of the Baton Rouge—which has been shielded from the economic downturn—and Lake Charles.
“At the beginning of the year, job numbers were down some 12,000 over the same period in early 2015. By April, they were down 15,000. Today, they’re down nearly 20,000. In other words, we’re trending in the wrong direction,” Riegel writes.
Greg Albrecht, the state’s chief economist, and others attribute the state’s troubling job numbers in large part to the drop in oil prices.
Riegel says companies in the upstream sector of the industry have made huge cuts to their workforce, and the effects have started to ripple out to other segments of the economy in oil patch areas of the state. Sluggish national and international economic growth is also important factors.
“Even though billions have been spent here on industrial expansion over the last three years—with still more promised for the future—it’s increasingly apparent that the big numbers touted in press releases and groundbreaking ceremonies just don’t translate into that many dollars for the state’s coffers,” Riegel writes.
Making the problem worse, corporate income tax collections are down, largely because many of the generous tax credits promised in recent years were redeemed this year, she writes.
“It’s not as though the claimants were doing anything wrong or trying to skirt their liabilities,” Riegel says. “They were simply companies in the pipeline and their projects were completed, so they put in to collect what the state had guaranteed them during the previous administration.”
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