With Reform on the Horizon, New Tax Breaks for Petrochemicals Are a “Losing Proposition,” Data Suggest
BATON ROUGE, La. — Billions in tax incentives from the Industrial Tax Exemption Program (ITEP) have failed to produce job and income growth in Louisiana, according to “Giving Away the Future,” a new report from independent research firm Ohio River Valley Institute.
Join lead author Nick Messenger for a virtual presentation of the report’s key findings on Tuesday, February 27 at 1 PM CT. Click here to register, and contact Ben Hunkler, Communications Manager with the Ohio River Valley Institute, for an embargoed copy of the report at ben@ohiorivervalleyinstitute.
“Louisiana’s ITEP program is one of the most generous corporate giveaway programs in the nation, lavishing more than $20 billion in foregone local tax revenue to petrochemical companies and other corporations,” explained Nick Messenger, an economist with the Ohio River Valley Institute. “Yet data show this program has been a bad deal for Louisianans. Despite enormous taxpayer-funded investments, ITEP has generated no net new jobs in decades.”
Governor Jeff Landry signaled this month that his administration aims to roll back the program’s job creation and retention requirements and remove opportunities for local input, adjustments the governor could make via executive order.
“Giving Away the Future” presents a rigorous statistical analysis of the connection between job growth, income growth, and ITEP exemptions since 1998, finding no statistical correlation between the parishes with the greatest ITEP exemptions and those that experience high rates of economic growth. In fact, controlling for other factors, the parishes with greatest income and job growth tended to have the lowest rate of ITEP utilization.
ITEP’s promised “trickle down” effect has not materialized in over thirty years. Though Louisiana’s gross domestic product (GDP) may rise when large, tax-exempt facilities move into the state, those gains in economic output do not translate into net job growth or overall prosperity. The program has compounded inequality by redistributing economic value from poorer parishes with polluting, tax-exempted industrial facilities to affluent parishes from which high-income workers are more likely to live and commute.
“Louisiana’s economic development strategy can be summed up as that of trying to win a larger piece of a shrinking pie at the expense of its public services, environment, and residents’ health,” Messenger continued. “It’s a losing proposition, especially as Louisiana bleeds population and falls near the bottom of business formation, job creation, and economic growth rankings.”
A significant portion of ITEP dollars have gone to fund petrochemical projects and other industries broadly in decline due to automation and outsourcing. Proportional to its population, Louisiana is more reliant on petrochemical development than any other state in the country, leaving the state’s economy vulnerable to price volatility and global market shifts in the oil, gas, and chemical industries. Further, typical cost-benefit analyses of ITEP’s effectiveness fail to account for environmental and health costs imposed on communities by the petrochemical industry and other industries generally associated with high volumes of pollution.
The Ohio River Valley Institute (ORVI) is an independent, nonprofit research and communications center founded in 2020. Our work charts a course for shared prosperity, clean energy, and more equitable civic structures in central Appalachia and beyond.
