Report Reveals Size and Growth of Tax Expenditures amid Shrinking State Revenues
BATON ROUGE — The Louisiana Budget Project (
LBP) reports that Louisiana will spend more than $7 billion on tax breaks next year, almost as much as it will spend in state revenues.
In a report released today titled
Louisiana’s Hidden State Budget,
LBP explains that more than 440 separate pieces of legislation currently exempt a wide range of corporations and products from tax liability, reducing state revenues during an historic economic downturn and immediate budget shortfall.
Characterized as “tax-side spending,”
LBP notes that the revenue lost to tax exemptions is on the rise, projecting the growth in cost at 28% between 2006 and 2011. State revenues, meanwhile, are expected to fall by 3%.
Authors contrast the appropriations process, which receives annual review and wide public scrutiny, with the hidden budget of tax expenditures that often persist for years without further evaluation or sunset provisions.
“To more efficiently manage its finances and build a stronger future,” say
LBP analysts, “Louisiana needs to shed more light on its hidden, tax-side spending.”
In one example cited by authors, Louisiana has allowed since 1994 a two-year moratorium on severance taxes for the drilling of horizontal oil and natural gas wells. This tax break was implemented when horizontal drilling was in its infancy and the industry needed incentives for new exploration.
Today, the
Haynesville Shale in north Louisiana draws intense competition as one of the largest natural gas reserves in the country. Yet existing tax breaks continue to exempt oil companies from paying needed state revenues. “In fiscal year 2011,” say authors, “tax exemptions on severance taxes will cost Louisiana $189 million,” a cost that may grow considerably as the
Haynesville gas field is fully developed.
“When our university system is publicly announcing it may have to close numerous campuses and raise student tuition,” said
LBP Director Edward
Ashworth, “I think about all that lost tax revenue being sucked into oil company tankers.”
For a copy of the complete report and to learn more about the
Louisiana Budget Project, visit www.
labudget.org or contact Edward
Ashworth at 225.929.5266.