Louisiana's New Governor Gutted Critical Corporate Subsidy Reforms

Louisiana's loss, and ours.

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When he came into office in 2016, former Democratic Louisiana Gov. John Bel Edwards used an executive order to make several reforms to the state’s Industrial Tax Exemption Program. Known as ITEP, it’s one of the most notorious corporate subsidy programs in the country, mainly benefitting large oil and gas producers.

And those reforms worked: After they went into effect, corporations wound up paying significantly more in property taxes to support the communities in which they were located, with no drop-off in business investment.

In fact, the changes worked so well there was quite a bit of speculation that they would survive under Edwards’ Republican successor, Jeff Landry.

Alas, not so much. Last week, Landry issued his own executive order gutting some of the most important parts of Edwards’ reforms.

It’s a loss for Louisiana, most definitely and most importantly, but it’s also a loss for anyone concerned about corporate control of local communities, budgets, or policy priorities, because it showed corporate interests triumphing even when the data and real-world experience were firmly against them.

Edwards’ executive order consisted of three parts: 1) Capping ITEP corporate handouts, which are based on property taxes, at 80 percent of the property’s value, so 20 percent always stayed on the books, ensuring local communities were guaranteed something even when a deal was approved; 2) adding a requirement that projects receiving tax breaks actually create jobs; and 3) giving local government bodies, including school boards and sheriff’s offices, the ability to reject the portion of tax break deals that affected their budgets. So, for example, a school board could reject the portion of a property tax break that would have affected the school’s funding.

Landry kept the first part of Edwards’ reforms but junked the latter two: So going forward, there’s no more job creation requirement, and no more local input. In place of local government bodies receiving an affirmative vote on ITEP deals, Landry created local councils that can be overridden by the state.

It’s bad all around. There’s no justification for either of these changes other than the belief that Louisiana wasn’t pumping enough taxpayer dollars directly into corporate coffers — which is saying something, since Louisiana currently has the second highest amount of disclosed corporate subsidies of any state in the nation, trailing only New York.

Independent analyses have been painfully clear that the 2016 changes Edwards mandated were positive. In late 2022, a study by the Institute for Energy Economics and Financial Analysis showed that Louisiana communities received more than $280 million in annual revenue increases after the 2016 reforms went into effect, with applications for new ITEP handouts dropping dramatically. That’s hundreds of millions of dollars going into schools and services such as law enforcement, parks, and libraries that previously subsidized corporations.

The most effective part of reforms, per the study, was the requirement for local input into corporate subsidy deals: Corporations, faced with the prospect of making a public case for taxpayer money, became far more reluctant to even make an application.

Crucially, the study showed that business investment in Louisiana went up after the 2016 changes — undermining the very justification for ITEP. If corporations are going to build and invest without a handout, there’s no reason to provide one. You might as well light public money on fire.

Another study released this week by the Ohio River Valley Institute similarly showed that the justification for ITEP is bogus, specifically “finding no statistical correlation between the parishes with the greatest ITEP exemptions and those that experience high rates of economic growth. In fact, controlling for other factors, the parishes with greatest income and job growth tended to have the lowest rate of ITEP utilization.”

So, again, there’s no reason for Landry’s changes other than the belief that corporations weren’t efficiently extracting enough public money from Louisiana communities.

Local activists and other corporate subsidy reform advocates — myself included — had hoped that the politics of this situation would stay Landry’s hand. And to be fair, he did fudge it on the campaign trail, making it seem like he would keep the local input provision in place, before gutting it in all but name once in office by making the state the final arbiter. He likely knew this would be unpopular, so didn’t show his hand fully. And corporate leaders have been trying to get Edwards’ changes off the books since he made them, so they’ve almost certainly been in Landry’s ear since he was inaugurated.

Providing the state with the ability to approve deals over the objections of local governing bodies, given Louisiana’s history, functionally means approving every deal: Prior to Edwards’ reforms, a state board charged with approving ITEP subsidies waived through 99.95 percent of all applications.

Of course, a future governor could reverse course again and reinstate Edwards’ reforms, or even go further. But for now, Landry dealt a blow not only to Louisiana communities, but to everyone hoping to rein in the ability of corporations to extract resources from local communities.

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UPDATE: Last week I wrote about the grocers Kroger and Albertsons making a nonsense defense of their proposed merger in the face of multiple antitrust lawsuits. This week, the Federal Trade Commission, as predicted, filed its own case to block the merger, joined by the attorneys general of Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon, and Wyoming.

“Kroger’s acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today,” said Henry Liu, director of the FTC’s Bureau of Competition. “Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating.”

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— Pat Garofalo