State lawmakers’ tax break review hits snags

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A sweeping review of billions of dollars in tax breaks on Louisiana’s books is proving to be a difficult task for lawmakers to get their arms around.

For some tax breaks, there’s no data to review because no agency’s tracking their use or their benefits. For others, lawmakers hear tales of doom and gloom if they question whether to discontinue a tax exemption or credit.

And the legislators have no model for comparing the worth of tax breaks against each other.

The Revenue Study Commission is an interesting educational exercise, but it remains to be seen what it will accomplish.

Even the chairman of the panel says he doesn’t think the commission will offer a list of tax breaks it thinks should be eliminated or tweaked.

“I don’t see the commission offering up some legislative package with regards to winners and losers,” said Rep. Joel Robideaux, R-Lafayette, who’s leading the review.

The 14-member study panel of legislative leaders launched the six-month study of the $6.8 billion in tax exemptions, rebates and credits on the books after repeated rounds of budget shortfalls stripped dollars from public colleges and health care services.

The goal was to determine if Louisiana gets enough benefits from the giveaways to justify the cost of them.

But nearly as soon as the commission started its work, lawmakers ran into snags. Was there data to review? How do you grade a tax break? Who even knows why some decades-old exemptions were enacted in the first place?

“I think that from the beginning, that was going to be a big hurdle: How are we going to get information that allows us to evaluate the impact? For a lot of them we just don’t have the impact,” Robideaux said.

For years, when state coffers were flush, tax break bills sailed through the Louisiana Legislature, with governors and lawmakers arguing multimillion dollar tax breaks, particularly for businesses, are needed to attract companies to the poverty-ridden state.

But with the state and national economies struggling, Republicans and Democratic state lawmakers are questioning if they’ve been too generous.

The Louisiana Department of Revenue’s annual “tax exemption budget,” explaining what tax breaks are on the books, stretches over 400 pages. And follow-up reviews of some tax breaks are showing that they are far exceeding the initial estimated costs to the state, by millions of dollars.

For example, a tax break passed by lawmakers in 2007 to spur investment in solar energy was estimated to cost less than $500,000 a year. In four years, the state shelled out $37 million for the tax credit – more than 18 times the maximum estimate, according to revenue department data.

A financial analysis of the bill creating a tax credit to encourage buying alternative fuel vehicles estimated a cost of less than $1 million for the first five years. Instead, it has cost the state about $30 million since 2009, according to the revenue department.

The Revenue Study Commission’s task was to comb through the list of tax breaks and recommend the temporary or permanent reduction or elimination of credits, exemptions and exclusions deemed to be low-performing or antiquated.

Its suggestions are due to be compiled by Feb. 1, with any legislation stemming from the review to be considered in the regular session that begins two months later.

Robideaux said he expects individual lawmakers who sit on the study panel will introduce bills to get rid of some tax breaks that came up for review.

As for a package of commission recommendations?

Robideaux said he’s expecting the group of lawmakers will push some sort of tax break policy that would require follow-up evaluations, data collection and reporting – so lawmakers can monitor the real fiscal impact of what they enact.

“To me that might be the biggest thing that’s going to come of the commission,” he said.

But those follow-up evaluations would still run into the same problems lawmakers have found now. Somebody will still have to make a judgment call about whether they’re worth the money.

EDITOR’S NOTE: Melinda Deslatte covers the Louisiana Capitol for The Associated Press.