DAN JUNEAU – The LABI Report

In less than a week, the special session of the Legislature will convene. A limited number of items will be discussed, but some are extremely important if we are to turn around the huge job losses this state has endured in the last five years.

During that time period, the state actually lost 1,200 jobs. Not a big figure? Consider how many thousands of individuals entered the job market in Louisiana during that time and ran up against this problem of no net new jobs being created. What did they do? They moved.

This staggering crisis in job creation has fueled Louisiana’s outmigration problem, taking talented individuals and their salaries and purchases out of the state and out of the economy. It is a problem that feeds upon itself.

During that five-year period, the goods producing sector of our economy lost 34,000 jobs. Mining (which includes high paying oil and gas jobs) dropped 2,800, while construction jobs fell by 3,000. Some of the highest paying jobs in the state – manufacturing jobs – fell from 186,500 jobs in January 1999 to only 156,500 in November 2003. That is a staggering loss of exactly 30,000 jobs. Louisiana cannot afford a continuation of this economic plague. The special session is the first opportunity for our new governor and newly elected (or re-elected) legislators to address the situation.

Governor Blanco deserves strong praise for being the first governor to lift a finger to remove two huge disincentives to job creation and business investment in Louisiana.

During her campaign for governor, she pledged to phase out the state sales tax on manufacturing machinery and equipment and the debt portion of the corporate franchise tax. She has publicly stated that her administration will introduce legislation in the special session to begin elimination of these taxes that make Louisiana stick out like a sore thumb when compared to other states.

Unfortunately, the governor’s current plans do not call for beginning the phaseout during the next fiscal year. Instead, she is proposing to delay the implementation for one year.

The governor certainly has some budget concerns to deal with during the regular session. She is trying to spread a limited amount of peanut butter over a wide slice of bread.

But in a real sense, the sooner the business community statewide and nationally can see the removal of these taxes actually begin, the sooner Louisiana will become more appealing for jobs and investment, and the more peanut butter there will be to cover the bread. The employment figures above strongly argue that the phaseout should begin immediately if the economic development signal delivered is to be a strong one.

Some will argue in the Legislature that these taxes should never be removed. Those who embrace this philosophy are like the dinosaurs grazing on the plains, oblivious to the climate changes that will kill them.

Others claim that the taxes should be ended now, which is a sound theory but one that would never survive the legislative process in tight budgetary times.

The phaseout of a non-competitive tax has been done before. The inventory tax was removed over a number of years during the ’90s and is no longer an obstacle to growth and development. A reasonable phaseout can remove the debt portion of the franchise tax and the sales tax on manufacturing machinery and equipment as well.

What will give a phaseout more bang for the buck is an immediate implementation. In a budget of billions, it should not be difficult to find a relatively small amount of dollars to send the message that change starts now.

DAN JUNEAU is president of the Louisiana Association of Business and Industry.