Jindal To Attempt Massive Tax Credit Overhaul In Final Months

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Peter Fricke Contributor
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Louisiana Gov. Bobby Jindal used his final address to the state legislature to call for a major reform of business tax credits, claiming it would save the state over $500 million.

Louisiana faces a projected $1.6 billion budget deficit for the fiscal year that begins July 1, but Jindal, a potential 2016 Republican presidential contender, “says he won’t support anything he considers a net increase in taxes,” and frames his tax credit proposal as a way to balance the budget without cutting services or raising taxes, according to the Associated Press.

“We must balance our budget without raising taxes on our people,” Jindal told legislators, pointing out that, “It is their money, not ours.” (RELATED: Jindal Proposes Elimination of Income and Corporate Taxes in Louisiana)

Jindal acknowledged that “the easy way out” of the state’s budget crunch would be to simply raise taxes, but argued that, “when it comes to raising taxes, we know that when government takes more of our people’s hard earned money our economy lags, job growth lags, and we put families in a tight spot.”

Jindal’s plan, which was included in his 2015 budget proposal, would convert a variety of refundable corporate tax credits into non-refundable credits, which he claims would boost state revenues by $526 million, eliminating roughly one-third of the projected deficit.

Among the tax credits targeted by the measure are those for wind and solar, research and development, natural gas, milk, and even “musical and theatrical” endeavors. (RELATED: Gov. Bobby Jindal Considering Elimination of Taxes on Oil and Gas Extraction)

Refundable tax credits are limited only by the conditions attached to the credits themselves, regardless of the recipient’s tax bill, meaning the state must make direct payments to companies whose tax credits exceed their tax liabilities. Making the credits non-refundable would eliminate that subsidy, but would otherwise leave business incentives (and tax rates) untouched.

“The truth is, today we have a system of corporate welfare in this state,” Jindal asserted, adding that, “It would be wrong for us to impose cuts to higher education, in order to protect this corporate welfare. If companies are getting checks from the taxpayer as opposed to paying taxes, then that is government spending that needs to be examined and reduced.”

“Our businesses are a great asset,” he said, “but we cannot stand idly by while companies pay zero in state taxes and then continue getting free taxpayer money from the government on top of it.” (RELATED: States May Have to Disclose Business Subsidy Costs)

Lawmakers, however, “haven’t embraced the proposal,” the Associated Press reports, noting that Jindal’s relationships with state legislators “have become increasingly frayed as he nears the end of his second term.”

Instead, they are proposing a variety of alternatives, from cutting tax breaks for specific industries to a yearlong suspension of most tax breaks. Others, though, are hoping that Jindal’s idea can be taken a step further.

According to The Advocate, the outgoing secretary of the Louisiana Department of Economic Development, Stephen Moret, encouraged lawmakers at a recent budget hearing to scrutinize film tax credits as well, claiming the credits now cost more money ($240 million last year) than they generate in economic activity.

“Jindal’s proposed budget doesn’t recommend any changes to the film credits, which have become a poster child for corporate welfare,” the article says, but quotes a spokesperson for Jindal who said the governor is “open to working with legislators on tax credits—any of them—if there’s an appetite for that.”

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