Saturday, May 18, 2024

Unfulfilled Promises: Louisiana’s ITEP Tax Incentives Fail to Boost Job and Income Growth, Study Reveals


Giving Away the Future: Billions in ITEP Incentives Fail to Grow Jobs in Louisiana, Study Finds

Despite billions of dollars in tax incentives offered through Louisiana’s Industrial Tax Exemption Program (ITEP), a new study suggests that the state and its residents have seen little in the way of job and income growth. The report, titled “Giving Away the Future: How Louisiana’s ITEP Has Failed to Produce Prosperity,” comes from the Ohio River Valley Institute (ORVI), an independent research firm that focuses on sustainable economic development.

The study was the centerpiece of a recent webinar hosted by ORVI, where findings from the report were discussed in depth. According to Ben Hunkler, communications manager for ORVI, the study represents a comprehensive analysis of the ITEP program utilizing rigorous economic and statistical methods to examine actual job and income data.

Established in 1936, ITEP is one of the largest corporate tax subsidy programs in the United States, having exempted over $20 billion in local tax revenue since its inception. The program has undergone reform, most notably in 2016, when an 80% exemption rate was implemented along with a new job-creation requirement and a local approval process. Despite these changes, recent amendments by Governor Jeff Landry have introduced new provisions that could potentially impact the effectiveness of these reforms.

The ORVI report specifically investigated the relationship between ITEP exemptions per parish and both job and income growth, revealing several key findings. The research showed that there is no statistically significant correlation between the dollars exempted by ITEP and job or personal income growth. In fact, parishes experiencing the most job growth and rising incomes actually utilized ITEP the least, suggesting that the benefits of the program may be overstated.

According to Nick Messenger, economist and senior researcher at ORVI, the study indicates that relying heavily on corporate tax exemptions as a means to economic prosperity does not necessarily yield the expected returns. Despite exempting substantial amounts of money with the hope of spurring economic turnaround, Louisiana remains ranked poorly in terms of overall economy and per capita income, according to recent rankings.

Messenger also highlighted a nationwide flaw in industry forecast models, which often fail to account for the potential negative impacts of industrial development. The study suggests that Louisiana’s economy is overly reliant on the petrochemical industry, which does not necessarily translate into earnings for local workers, and may indirectly subsidize environmental and health damages.

In light of these findings, the report recommends incorporating clawback mechanisms in tax exemption programs to ensure that benefits promised during the application process materialize. Such provisions have already seen use in Louisiana, as demonstrated by the Calcasieu Parish School Board’s action against Indorama Ventures Olefins LLC for failing to meet ITEP requirements.

The Ohio River Valley Institute suggests that effective tax exemption programs should be selective and focus on industries where Louisiana has a comparative advantage, such as tourism and the fishing industry.

Founded in 2020, ORVI aims to promote shared prosperity, clean energy, and equitable civic structures through research and communication. The Institute’s work emphasizes the need for a transition to clean energy and sustainable economic development models that can improve quality of life and foster community-wide prosperity.

Alexandra Bennett
Alexandra Bennett
Alexandra Bennett is a seasoned business journalist with over a decade of experience covering the global economy, finance, and corporate strategies. With a Bachelor's degree in Economics and a Master's in Business Journalism from Columbia University, Alexandra has built a reputation for her insightful analysis and ability to break down complex economic trends into understandable narratives. Prior to joining our team, she worked for major financial publications in New York and London. Alexandra specializes in mergers and acquisitions, market trends, and economic

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