To preempt, or not to preempt? Is it better to have some state-level group of appointees decide who gets how much in tax breaks, or have local elected officials determine if there’s a fair return for giving up their revenue? State-level decision-making, or local determination and democracy? That’s an overarching question posed by bills now prefiled for the legislative session starting next Monday, April 8.
Some of the proposals seek to reinstate full state-level control over exempting industries from paying local property taxes, while others look to open up the sacrosanct homestead exemption to changes – via local option elections. Still another bill would authorize local option elections to legalize marijuana.
And, in the case of HB 281, authored by Rep. Blake “Top Shot” Miguez (R-New Iberia), the bill seeks to expand previously enacted state preemption. The measure even uses the “p” word!
Subtitled – or, more properly, described – as “WEAPONS/FIREARMS: Provides relative to preemption of state law for firearms,” HB 281 would remove the ability of local governments to have any ordinances prohibiting possession of a firearm in a commercial establishment or public building.
Current law, enacted in 1985, is titled “Preemption of state law,” although it should be more accurately called “Preemption by state law” or “Preemption of local control.” It states, in the classic wording of state preemption, “No governing authority of a political subdivision shall enact any ordinance or regulation more restrictive than state law concerning…” in this case, “firearms or ammunition”. The Miguez bill would remove the law’s language that permits locals to designate certain buildings – like city hall, or city court – as firearm free zones.
It will be particularly interesting if the Miguez bill is heard by the House Criminal Justice Committee the same day as HB 382, by Rep. Kenny Cox (D-Natchitoches). That measure would prohibit firearm possession in any park, playground or recreational facility open to the public. Though it has the opposite purpose of the Miguez bill – restricting versus expanding locations where firearms are allowed – the Cox measure is also a form of state preemption of local governance. It might be okay – even appropriate – to carry a firearm while boating in recreation areas of the Atchafalaya Basin, whereas carrying a weapon to a 4th of July barbeque in an urban park could be a trigger for fatal fireworks. What is appropriate for parks in Calcasieu Parish isn’t necessarily right for those who frequent the parks in Claiborne Parish.
The entire concept of different areas of the state having different standards is what led to local option elections for “gaming” in the late 1990s. It’s also – presumably – the prompt for HB 462, by Rep. Cedric Glover (D-Shreveport). Glover’s bill would permit local governing authorities to call an election for the purpose of allowing the sale, possession, distribution, and use of marijuana. Glover’s measure – one of a dozen or so bills regarding marijuana that have been filed this session – is a constitutional amendment. It, too, is set to be heard by the House Criminal Justice Committee, and would have to get approval by two-thirds of the House members, two-thirds of the state Senate. Then it would have to be approved by a majority of state voters this fall before local governing bodies could ask – at some future election date in 2020 or after – whether or not their town, city, or parish specific voters want legalization.
Remote as the possibility of that bill passing seems, it appears even more unlikely that a duo of suggested constitutional amendments – HB 12 by Rep. Steve Carter (R-Baton Rouge) and/or HB 439 by Rep. Barry Ivey (R-Central) – will find much favor with either lawmakers or voters. Those measures propose sacrificing (parts, at least) of one of Louisiana’s most sacred cows.
The homestead exemption was amended into Louisiana’s constitution (the state’s 1921 constitution, our eighth such document) in 1934. Louisiana was (unsurprisingly) following the lead of Texas, which had adopted its own homestead exemption plan two years earlier. In the financial turmoil of the Great Depression, it was expected the property tax break for primary residences would help protect homeowners and small farms (up to 160 acres) from losing their homes due to tax delinquency and/or forfeiture. Subsequently, during the national economic boom following World War II, the exemption was kept in place as a perceived inducement and incentive for home ownership.
Now the property tax break exempts an owner-occupied home from state and parish property taxes due on the first $75,000 of value, and the homestead exemption is highly-favored by Louisiana citizens, and generally viewed as an “entitlement” for the middle class. Yet throughout most of its existence, the personal property tax break has been critiqued by good government groups and tax structure studies. For example, in 1962, a study by the Public Affairs Research Council (PAR) stated, “the homestead exemption program should be substantially revised.”
Within the past decade, discussions on tax reform have returned repeatedly to Louisiana’s lack of a (much-needed) tax structure leg to stand on. Former Gov. Bobby Jindal’s 2013 proposal to eliminate state income tax – imitating Texas – never made it out of the starting gate, presumably because Jindal’s plan substituted reliance on only higher sales tax to make up for the loss in income tax revenues. The proposal was utterly unrealistic and unworkable because, unlike Texas, Louisiana has no dependably robust property tax base. That’s partly because of ITEP, but mostly due to the political untouchability of the homestead exemption. Additionally, while the language of the current state constitution (enacted in 1974) permits the enactment and assessment of statewide property taxes, only parish-level and municipal-level property taxation is actually implemented. And no matter how deep the budget hole, nor how high the fiscal cliff, in more than two decades of reporting on the Louisiana Legislature, I have yet to see a bill filed that could initiate collecting a state property tax.
Yet both Rep. Carter and Rep. Ivey believe homeowners would be willing to either reduce or shift the amount of their property tax exemption, and voluntarily take on a “fairer share” of the local tax burden. Carter’s bill would have the exemption kick in after the first $10,000 in value, but still top out at $75,000 in value, thus reducing the overall amount exempted from $75,000 to $65,000. Ivey’s bill would let each parish government and voters choose the amount or percentage reduction they are willing to adopt.
Both of the capital-area Republicans’ proposals insist that the total amount of property taxes collected would not go up. Both measures would require reductions to the property tax bills of businesses, industries, rental properties – even vacant lots – to offset the “fairer share” single-family homeowners would be paying. It’s unclear whether new business or residential developments subsequently coming onto the tax rolls would be under that overall amount cap, requiring further recalculation of taxes due, but that may all be clarified during committee and/or floor hearings on the bills.
Ivey’s bill is part of his renewed attempt to enact comprehensive tax reform. And there’s little doubt that both Barry Ivey’s and Steve Carter’s bills are partisan philosophical reactions to the ITEP controversy, i.e., “If local decision making is such a good thing for commercial property tax exemptions, then shouldn’t it be just as good for homeowners’ and their homestead exemption?” Good? Yes. Likely to pass, with its complex calculations and asking homeowners, who’ve benefitted from the property tax exemption for the past 84 years, to pay more so businesses can pay less? no.
But, as Rep. Steve Carter put it in a recent interview with The Advocate’s Mark Ballard, “I know it’s a sacred cow. But unless you put it out there, you’ll never know what you can do.”
“The model of government created by Huey Long – which relies on excessive political power and the heavy hand of state government far too much – must be holistically transitioned to a system that embraces the principle of local control and taxation closest to the people.” – Louisiana Association of Business and Industry president Stephen Waguespack
The Homestead Exemption and the Industrial Tax Exemption (ITEP), both created in the 1930s, can loosely be attributed to the state’s “Huey Long era.” Both post-dated Long’s governorship, although both qualify as examples of state preemption of local democracy. And, ostensibly, both should be on Waguespack’s philosophical chopping block, based on what the LABI president said in the above quote– “local control, and taxation closest to the people.”
Once Gov. John Bel Edwards’ executively-ordered reforms to the ITEP program were implemented, and locally-elected governmental agencies – parish councils and police juries, school boards, sheriffs – began reducing and even rejecting some of the tax breaks, LABI and Waguespack composed different lyrics to the song they’d been singing.
Speaking to the Baton Rouge Press Club on February 4, Waguespack condemned the ongoing criticism that’s been branding ITEP as “corporate welfare.”
“If the tax code is so warm and fuzzy and friendly to the business community in Louisiana, why aren’t our skylines growing like Houston and Atlanta and Nashville and these other cities in the South?” Waguespack asked, rhetorically. “We have to stop this dangerous rhetoric that’s destroying our business climate.”
LABI released a brochure the same day, branded as a “report” on ITEP and manufacturing in Louisiana.
“ITEP remains far more limited than in previous years with less recognition of the importance of manufacturing investment,” the pamphlet states, before it goes on to compare parts of Louisiana’s tax base with Texas. It also urges (as Waguespack had in his speech earlier in the day) a single local point for ITEP approval in the future, with that local authority having the ability to recommend the state Board of Commerce and Industry give higher exemptions for longer periods of time.
That’s right. LABI wants its member industries exempted from greater than the current 80-percent of property taxes, and for longer than the current maximum eight years. The math they use to argue for this is so fuzzy it could benefit from a good, close shave.
The Why It Matters: ITEP brochure says “Manufacturing brings prosperity to Louisiana,” then goes on to claim that “Parishes with high levels of ITEP benefit from higher tax collections.” The pamphlet then presents charts showing that those are higher per capita tax collections than the statewide averages.
Per capita means per person, and, LABI says, the statewide average for property tax per person is $935 per year. In Cameron Parish, with the greatest volume of ITEP, the average property tax paid per person per year is $4850. The disparity for sales tax is even greater: with a statewide average of $551 paid per person, and Cameron Parish collecting $3481 per person. Corporations get the tax exemptions, while the people who live there each become responsible for more than five and six times the state average for certain types of taxes.
Defining “Local Control”
It’s expected LABI will be supporting SB 214 and HB 529, co-authored by Sen. Bodi White (R-Baton Rouge) and Rep. Franklin Foil (R-Baton Rouge). Identical measures, they return sole authority for ITEP approvals to the (appointed) state Board of Commerce and Industry, while keeping a nod to the concept of local input about the local property taxes being waived.
The bills add a trio of parish appointees to the C & I Board’s voting membership; one from the parish governing body, one from the school board, and one from the sheriff’s department. Each parish will have its trio of C & I members, who will vote on the tax exemptions being requested for their parish. It means any public debate over return on investment for the tax exemptions will be conducted at the Commerce and Industry Board hearings in Baton Rouge – not in local public meetings of local school boards and parish councils or police juries. Local citizens objecting to corporate exemptions will have to file those objections with what will be a 27-member statewide board of political appointees.
So now we know…when representatives of LABI say “local control,” they don’t mean “control by locals”. They mean “control of locals.”