Thursday, May 8^th, 2008

Baton Rouge, Louisiana

IT’S ALL ABOUT WHOSE

OX IS BEING GORED.

So what's all this controversy about earmarks? “Pork-Barrel Spending” shout editorial writers all over Louisiana. On the national level, Republican presidential nominee John McCain has "vowed to veto all earmarks as president, and to make the authors famous." All these so-called pet projects by legislators have even caused Louisiana Governor Bobby Jindal to threaten line-item vetoes of special projects added in to the new state budget. So can any of these local requests be justified?

The state capital’s local newspaper editorialized that no earmarks or local grants should "beyond state government’s tab unless they have a direct relevance to state agencies’ missions.” But the devil is in the details. Who's going to define the mission of any state agency? Isn't that the job of the state legislature? Where is it written that only the executive branch can pad its budget with local projects funded to private groups? You might be surprised to read that in a number of state governmental agencies dole out tax dollars to private groups all the time.

A review of the Lieutenant Governor's budget shows vast discretion in handing out tax dollars to private organizations and individuals. Grants are given to a cross section of many in the private sector working in dance, theater, music, crafts, photography, creative writing, folklife, filmmaking; the list is extensive. As long as the funds are doled out by someone in the executive branch, apparently there is no problem.

The Insurance Commissioner has given millions of dollars to private insurance companies on a wing and a prayer with the hopes that they may sell more insurance policies in Louisiana. This corporate welfare handout raises eyebrows in other states, but is the norm here in the Bayou State.

But how bout them Hornets? The New Orleans basketball franchise is on a roll now on their way to perhaps being the next NBA champs. They are receiving big bucks from the state, but look at the impact they are having in the local New Orleans economy. And the impact is big. They are drawing some 18,000 fans into a metropolitan area of close to a million people. Sure this is good for the local economy, but is it fair to subsidize a New Orleans sports team yet disregard a smaller investment with just as much local impact?

Here’s an example. A state legislator from North Louisiana is proposing a grant to build a 500 seat rodeo arena in Winnsboro. Rodeo enthusiasts from several states would come to this small rural town a regular basis, eat in local restaurants, staying in local motels, and bringing new money into the local economy. You can argue that the percentage economic impact is every much as great as or greater than a basketball team receiving state funds in a much greater metropolitan area. But this is looked upon as pork.

How about the state’s economic development approach to giving generous tax breaks and outright subsidies to companies that threaten to take their business elsewhere, or who are being enticed to relocate in Louisiana? The most recent example is the giving of more than $8 million in tax dollars to a chemical company that was already here in Louisiana, have 90% of its employees in the state, and has the large majority of its customers here also. Albemarle Corp. has moved its headquarters and some 30 execs to Baton Rouge. The company is presently located in Richmond, Va. It seems only natural that the corporate big wigs would leave the small Virginia town and relocate to where the main operations and customer base is located. So are they justified in receiving millions of dollars in public money?

Just last week, USA Today published a major front-page story questioning the use of tax breaks and subsidies to lure new businesses. Several economists were quoted as saying there is little evidence to show that tax breaks have a lasting effect on the local economy.

"The impact of incentives dissipates quickly, so in a few years, there's no benefit to employment or to the local economy," says University of Nebraska economist John Anderson. And from the current mayor of Kansas City, Mark Funkhouser: “Tax breaks and subsidies take money from services -- such as police and schools -- that make a local economy successful. Tax breaks are like taking a painkiller to mask the underlying problem, richer quality-of-life issues like better education."

The issue in all this is whether the legislature should be able to adjust the executive budget and add public funding for private projects if a majority feels such funding is justified. Or should the executive branch have almost unbridled authority to fund, in its discretion, any number of nonpublic projects with taxpayers dollars?

Right now, there are few rules to the road. Maybe a decision should be made that tax dollars are to be used exclusively for public purposes. All the private projects that are being proposed are really doing little for the root problem of most of the state's ills. Until an across-the-board educational standard is dramatically raised at the elementary and secondary levels, diverting public money into hundreds of private projects, no matter how well-intentioned they may be, is a significant drain on the tools needed to reach those quality-of-life issues the experts talk about.

Are we patching our problem with short term subsidies? Maybe it’s time to go back to square one. Government in Louisiana seems to be living day to day, year to year with no long range thinking. A complete revamping of when, if ever, to spend tax dollars or give tax breaks to the private sector is long overdue.

******

A tax loophole is "something that benefits the other guy. If it benefits you, it is tax reform.''
— Russell B. Long, U.S. Senator.

Peace and Justice.

Jim Brown

Jim Brown’s weekly column appears in a number of newspapers throughout the State of Louisiana. You can read Jim’s Blog, and take his weekly poll, plus read his columns going back to the fall of 2002 by going to his own website at http://www.jimbrownla.com.

Jim’s radio program on WRNO (995 fm) from New Orleans is on the air each week, with a Sunday show from 11:00 am till 1:00pm. Other changes will be announced in the weeks to come.