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Goodbye Hollywood South, hello tax on Audubon Zoo

25th March 2013   ·   0 Comments

By Christopher Tidmore
Contributing Writer

Legislative Black Caucus member Elbert Guillory launched a very public campaign vocally opposing a key element of the governor’s tax reform proposal. This criticism—from an occasional ally of the Administration—demonstrates that as the details on the income/sales tax swap come to light, some of the votes that Bobby Jindal was counting upon in the April Regular session might be at risk.

In an open letter to the governor, the District 24 African-American State Senator endorsed the broad outlines of Jindal’s reform proposal. “I applaud the boldness by which you have put forth a proposal to eliminate the personal income tax and corporate franchise tax. I agree that if done carefully, such an endeavor would greatly incentivize industry to grow in our great state.”

GUILLORY

GUILLORY

“However, in doing so,” Guillory continued, “I find it of great importance to protect one industry that we have already done an outstanding job of nurturing in Louisiana—the Motion Picture and Television Industry.”

To increase revenues toward the income tax phase out, the Administration seeks to cap the provision of Hollywood South that provides tax credits for salaries. Some movie makers use that credit to write off a portion of multi-million-dollar salaries paid to top talent. Jindal said a “slight alteration,” like placing a cap on salaries that can be claimed, would make the program more affordable for the state and not harm the growing film industry.

“Your plan to impose a salary cap on above-the-line individuals (like providers of cast members) at $1 million is not a ‘slight alteration.’ It’s a virtual death sentence to the industry,” Guillory responded. “The real equity of a motion picture is its cast. Films with bigger celebrities have bigger budgets. Hence, they spend more money in Louisiana. They hire more locals as crew. And, they use more local vendors.”

Guillory defended the Film tax credits has having provided a $1.5 Billion impact to the state economy. Currently, credits allow producers to take 30 percent or more of their costs and use them to decrease one-to-one Louisiana tax liability. By limiting the salary range to $1 million for a production, recent Louisiana-produced blockbusters like Drive Angry and Olympus Has Fallen would likely have not been made in the Pelican State, and under the logic, Louisiana would not have become the third busiest film hub in the US.

Large studio productions with A-list stars, such as The Curious Case of Benjamin Button and the more recent G.I. Joe: Retaliation and Ender’s Game—employ far more people than smaller, independent productions, and usually for months at a time.

According to Will French, president of the non-profit Louisiana Film & Entertainment Association, “If such a cap is instituted in Louisiana, it will likely result in the bankruptcy of all the major studio facilities in the state and the loss of more than 10,000 jobs.”

The blockbusters might be only six or seven productions a year, but they constitute 50 percent of film spending in the state, and hence would have a detrimental impact to below the line funding he added in the March 15 missive.

Others on the left and the right disagree. The liberal Louisiana Budget Project noted that the film program has given the state back roughly 14 cents for every dollar spent—transferring roughly $500 million more in taxpayer resources to the wealthy in and out of the state than they managed to bring into the state, mainly through the sale of tax credits on the open market. The study also claims that only about 2,500 jobs are created directly by the program – a quarter of the total asserted by the LFEA.

A frequent conservative critic of Jindal’s, LSU-S Political Scien­tist Dr. Jeffery Sadow, defended the governor on limiting the Film Credits. “If each of those jobs cost the state $60,000 as estimated by the lefties at LBP—or almost the equivalent of paying for an entire undergraduate degree for a student at Louisiana State University Baton Rouge—if the state has to spend that money, wouldn’t footing the bills of a qualified college student be a much better call than on jobs that never will return even a fraction of that to state coffers?”

“The original intent behind it was to use it as a bridge to allow an indigenous support industry to grow where Hollywood would want to employ it without any state-organized bribery to get the moguls here. The point where that should have, if it has, happened has been surpassed long ago.”

However, others note that film credits and their close cousin, the Broadway South performance credits, have had other spin off effects, including the restoration of the Joy and Sanger Theatres in Hurricane ravaged New Orleans. Owners of the Joy told The Louisiana Weekly that without the restoration credits under the Broadway South, bringing back its lights on Canal Street would not have been possible. And, those credits are also on the proverbial chopping block in the tax swap.

Jindal argued that switching from personal and corporate income taxes to sales taxes would attract more industries to Louisiana, citing studies that show states with no income taxes having faster-growing economies, populations and job growth. To do so, though, by only increasing the state sales tax by 1.88 cents has meant that many of goods and services that enjoy exemption from taxation will no longer. And, each has a defender in the legislature.

While the governor specifically exempted legal, health care, and funeral services from the expanded group of sales taxes, he included virtually everything else not specified in the state constitution. (Post-Stelly Plan, food, medicines, and utilities cannot be taxed by the state.)

Everything from mining to taxi cabs, tax preparation to architectural and engineering services, interior design to computing, consulting to scientific research, advertising to photography will have a 5.88 cent state tax. Hiring a temp service, a security guard, a private investigator, a travel agent, a clean up crew, a public relations firm, a gardener, or an insurance agent will be subject to the new goods and services tax.

The price of a visit to the Audubon Zoo, or taking your dog to the vet, will go up as well. As will seeing a movie or patronizing the theatre, opera, or any music club with a cover charge. Tickets to the Jazz Fest will see the tax along with any other entrance fee at any festival or public performance. You will pay more for a commercial fishing rod and most offshore charter exemptions will go. Even your cable bill and cell phone fee will see a near six percent increase.

In a press release Thursday, March 21, Jindal called these exemptions “complex, unstable and unfair”.

“We have more than 460 loopholes on the books that make our system complex, volatile and unfair,” the governor continued. “If you have a lobbyist and lawyer, you have a loophole…We need a system where powerful special interest groups will no longer be able to rig the system. And to bring more job opportunities to Louisiana, we must start by having a tax structure that looks like it was designed on purpose. That’s why my top priority is to eliminate income taxes and more than 200 loopholes in a revenue neutral way.”

The governor also defended his plan, saying the “working poor” will be better off as the Earned Income Tax credit will be retained, offsetting the rise in other services for those making $20,000 or less, or earning retirement pay of $60,000 or less.

In theory, Jindal could garner $3 billion in revenues needed through a hike of only 1.88 cents (or from .09 to .11 for most New Orleanians) only by broadening what is taxable under the code. [And, increasing cigarette taxes by more than a dollar per pack.] The alternative, keeping the 490 exemptions, would have meant an increase of three to four cents on everything taxed currently, under the revenue models employed.

Strangely, that choice might have been easier to pass. The trick for the governor will be to convince legislators that attacking their sacred exemptions will be good policy. The constitution mandates two-thirds of the legislature to pass each sales tax hike. Exempting a third of House and Senate members already opposed to eliminating the income tax, achieving revenue neutrality means every vote counts.

Nowhere, however, has the governor said anything about the pace of the phase out of the income tax, and there might be a compromise. Jindal has insisted on revenue neutrality, yet a multi-year phase out of the personal income tax and a phase in of the sales taxes on exemptions could provide the breathing space for the legislature to consider other alternatives. One concept along these lines will be proposed by The Louisiana Weekly in the next edition.

The Administration, though, has said what is good for the state is not acceptable for parishes or municipalities. Local districts wouldn’t be able to charge their own taxes on services under the current proposal, a Department of Revenue spokesman confirms.

Tom Ed McHugh, executive director of the Louisiana Muni­cipal Association told the Baton Rouge Business Report that state officials mentioned the possibility of including a local option during early discussions with local officials, many of whom are concerned that a higher state sales tax would make it tougher for local governments to renew their own sales taxes or pass new ones.

The idea of allowing local sales taxes on services to mitigate that issue was discussed, but didn’t survive into the public proposal, McHugh explained. “There is concern if [the tax overhaul passes] around the ability of local governments in the future to pass sales taxes,” says Chris Loar, an Ascension Parish councilman. “I think you’ll see a shift toward property taxes.

This article originally published in the March 25, 2013 print edition of The Louisiana Weekly newspaper.

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