Dan Juneau
There is a lot of debate going on at the State Capitol on the issue of property taxation. Some of it centers on raising the homestead exemption, some on freezing or capping tax assessments, and some on carving out special property tax safe harbors for relatively small groups of people. The property tax issue is a complex one and few understand exactly how their property tax bills work.
Individuals with concerns about property taxes should focus on one main aspect: millages. The millage amount is applied to the assessed valuation of taxpayers’ property to determine the amount of taxes owed: the higher the millages, the higher the tax bill.
How do millages go up? Taxpayers can vote to increase the millages in a tax election. If the tax proposition passes, the new millages are added to the next tax bill. Perhaps the most common way millages go up relates to something called roll-forwards. Every four years, residential property is reappraised by the local assessors. If values rise (which is common), the state constitution requires that millages must automatically be rolled back to a level that collects the same amount of tax revenue on the books before the reassessment of property. However, the constitution also gives local governing authorities the option to roll the millages forward to their previous levels—without a vote of the people—in order to collect more revenue. Millages also will rise significantly if the homestead exemption is increased. An increase in the exemption narrows the tax base and millages then automatically roll forward (with no vote required on anyone’s part) to higher levels.
Some of the proponents of raising the homestead exemption say it would result in a reduction of property taxes. That isn’t correct. It would simply result in a transfer of property taxes from some taxpayers to others. It would become a tax increase to many homeowners whose homes are valued higher than the exempted levels, to businesses that already pay almost 80 percent of the property taxes, and to renters whose landlords would pass on their tax increases in the form of higher rents.
According to the Tax Foundation, Louisiana ranks dead last (51st among the 50 states and the District of Columbia) in residential property taxes paid. At the same time, Louisiana has the highest homestead exemption in the nation ($75,000 of home value). The taxpayers who have seen their property tax bills go up a noticeable amount are looking at the wrong element of relief if they think raising the homestead exemption is the answer. Most of the increases are coming from the roll-forward of millages by local governments after reassessments are done.
Everyone benefits from public education, public safety, roads, water, and sewerage infrastructure improvements, libraries, and other public services. The individuals who are pushing for a higher homestead exemption think only a small group of taxpayers—primarily business owners and homeowners who are already paying more than their fair share of property taxes—should be the exclusive source for funding those necessary services. Others in the Legislature are carving out property tax exclusions for small groups of homeowners, not by giving them a direct credit for lower taxes on their tax bills, but by having someone else pay their taxes.
Some members of the Legislature appear hell-bent on making a bad situation worse when it comes to our property tax system. Unfortunately, our Governor is voicing his support for some of the legislation that would be the antithesis of the fiscal reform needed to improve tax fairness and the business climate of Louisiana.
Sunday, May 24, 2009
Tuesday, May 19, 2009
The Champagne of the Hydrocarbons
05/15/2009
Some 30 years ago, I was coordinating a group of independent oil and gas operators from the Lafayette area lobbying members of Congress on energy legislation. During that time, we pushed successfully for some of the critical production incentives that are now being threatened by the Obama administration and their supporters on Capitol Hill. On one of my visits, I met with the chief legislative aide of then-Senator Lowell Weicker of Connecticut. She was the most intelligent person I met on the Hill-elected or non-elected. The first time I mentioned the words "natural gas," she replied: "Ah yes, the champagne of the hydrocarbons." As Congress and the Obama team thrash about in search of an energy policy, they would be well served to start with a tall glass of that champagne.
A sound energy policy for America should focus on what we have, what we need, and what reduces dependence on foreign energy sources. We need reliable sources for electricity and transportation. We have abundant energy sources in place. We need a rational energy policy to maximize domestic sources with national energy needs. We may get the opposite.
A few years ago, the conventional wisdom was that natural gas supplies had peaked and were entering a period of decline. That "conventional wisdom" was wrong. During the last two years, natural gas production increased by a total of 10 percent and new discoveries expanded proven reserves by 12.6 percent to 6.73 trillion cubic meters. The outlook for natural gas reserves is now improving, not declining, due to the huge amounts of gas located in shale deposits such as the Haynesville Shale field in northwest Louisiana (estimated to be the fourth largest natural gas field in the world). A sound energy policy should maximize the use of compressed natural gas (CNG) in vehicles, lessening dependence on foreign oil to meet those needs.
An increase in nuclear-generated electrical power is also a no-brainer. France gets most of its electricity from these plants, and 30 years ago the U.S. was moving in the same direction. America's electrical generation mix should see an increase in nuclear generation to bring more stability and reliability to the effort of meeting ever-increasing electricity demands.
The powers that be in Washington talk about spending trillions of dollars to increase "alternative" energy sources. Wind and solar power seem to be their favored candidates for huge amounts of federal funding. Science and economics indicate that these alternatives can be minor players in diversifying our energy mix, but cannot become major replacements for the fossil fuels that light our homes and power our cars.
Investments in clean coal technology, incentives for the natural gas vehicle marketplace, and a more streamlined permitting process for nuclear power plants should be the foundation of an energy policy that better protects the environment and has a decent chance of meeting future energy needs. It currently takes about 10 years to permit a nuclear reactor, seven years to permit a coal-fired power plant, and five years for a natural gas-powered facility. Bringing nuclear plant permitting more in line with other generation facilities would be a significant step forward.
Oil and natural gas are not going to disappear from our energy mix any time soon. Current efforts to subsidize solar and wind technologies by removing incentives for exploration and production of domestic oil and natural gas supplies are counterintuitive. We should maximize our domestic energy stocks, particularly those that wean us away from foreign sources of energy. If we don't, we are tilting at windmills in our quest for energy independence and reliability.
Some 30 years ago, I was coordinating a group of independent oil and gas operators from the Lafayette area lobbying members of Congress on energy legislation. During that time, we pushed successfully for some of the critical production incentives that are now being threatened by the Obama administration and their supporters on Capitol Hill. On one of my visits, I met with the chief legislative aide of then-Senator Lowell Weicker of Connecticut. She was the most intelligent person I met on the Hill-elected or non-elected. The first time I mentioned the words "natural gas," she replied: "Ah yes, the champagne of the hydrocarbons." As Congress and the Obama team thrash about in search of an energy policy, they would be well served to start with a tall glass of that champagne.
A sound energy policy for America should focus on what we have, what we need, and what reduces dependence on foreign energy sources. We need reliable sources for electricity and transportation. We have abundant energy sources in place. We need a rational energy policy to maximize domestic sources with national energy needs. We may get the opposite.
A few years ago, the conventional wisdom was that natural gas supplies had peaked and were entering a period of decline. That "conventional wisdom" was wrong. During the last two years, natural gas production increased by a total of 10 percent and new discoveries expanded proven reserves by 12.6 percent to 6.73 trillion cubic meters. The outlook for natural gas reserves is now improving, not declining, due to the huge amounts of gas located in shale deposits such as the Haynesville Shale field in northwest Louisiana (estimated to be the fourth largest natural gas field in the world). A sound energy policy should maximize the use of compressed natural gas (CNG) in vehicles, lessening dependence on foreign oil to meet those needs.
An increase in nuclear-generated electrical power is also a no-brainer. France gets most of its electricity from these plants, and 30 years ago the U.S. was moving in the same direction. America's electrical generation mix should see an increase in nuclear generation to bring more stability and reliability to the effort of meeting ever-increasing electricity demands.
The powers that be in Washington talk about spending trillions of dollars to increase "alternative" energy sources. Wind and solar power seem to be their favored candidates for huge amounts of federal funding. Science and economics indicate that these alternatives can be minor players in diversifying our energy mix, but cannot become major replacements for the fossil fuels that light our homes and power our cars.
Investments in clean coal technology, incentives for the natural gas vehicle marketplace, and a more streamlined permitting process for nuclear power plants should be the foundation of an energy policy that better protects the environment and has a decent chance of meeting future energy needs. It currently takes about 10 years to permit a nuclear reactor, seven years to permit a coal-fired power plant, and five years for a natural gas-powered facility. Bringing nuclear plant permitting more in line with other generation facilities would be a significant step forward.
Oil and natural gas are not going to disappear from our energy mix any time soon. Current efforts to subsidize solar and wind technologies by removing incentives for exploration and production of domestic oil and natural gas supplies are counterintuitive. We should maximize our domestic energy stocks, particularly those that wean us away from foreign sources of energy. If we don't, we are tilting at windmills in our quest for energy independence and reliability.
Wednesday, May 13, 2009
The “Louisiana Way”
Dan Juneau
Louisiana has suffered over the years from a reputation of
having politics unduly and negatively influence the business
climate of the state. Louisiana’s nearly unique system for
collecting and administering sales tax revenues is a
particular problem when the Bayou State is compared to others.
These two factors converged recently in a way that sends
another negative message regarding how Louisiana businesses
are treated in matters of taxation.
The issue centers on Louisiana’s system of sales tax
collection, in particular the lack of centralized collection
of sales taxes. In almost every other state, there is only one
collector of the sales tax: the state. The money is collected
centrally and disbursed back to the local governments in
proportion to their local rate of taxation.
Local jurisdictions pay the state a small fee to collect their
taxes; however, they save money by not having to maintain an
expensive and duplicative local bureaucracy to do the
collections. In the other states, the central collector also
conducts audits of taxpayers. If taxes have not been paid
properly, the state collects the principal, interest, and
penalties for both the state and the local taxing entities.
Businesses have to fill out only one form—not a multiplicity
of them—when they submit their sales taxes. And they are
subject to only one auditing entity—not scores of them.
Our antiquated system of sales tax administration results in
Louisiana ranking at the bottom of “tax fairness” indicators
among the 50 states. Our laws in this regard are bad enough.
Unfortunately, a recent opinion written by our Attorney
General, Buddy Caldwell, makes a bad situation worse.
Louisiana law prohibits entities that collect local sales
taxes from contracting with private auditors on a contingency
fee basis to audit sales tax returns. The logic for this is
simple: auditing entities should not be tempted to treat
taxpayers unfairly in order to increase their compensation
from the local governments. These auditors have contracts that
give them a percentage of the amount of money collected
instead of being paid a flat fee or billing on an hourly basis
to do the audits.
Some local governments have defied the law and continue to use
contingency fee contracts. They have hidden behind the fig
leaf of a flawed Attorney General’s opinion from years ago
that found the contingency contracts not in conflict with the
law. An Attorney General’s opinion is just that—one lawyer’s
opinion, not something that changes a statute.
Senator Jack Donahue requested that Attorney General
Caldwell’s office revisit the opinion written by one of his
predecessors. Caldwell’s office did that and issued two new
opinions that clearly cited legal reasons why the previous
opinion was flawed. Then politics entered the equation. The
contract auditors and the local collectors they work for
leaned heavily on Caldwell to withdraw his new opinions.
Their arguments centered upon their desire not to pay auditors out
of their own funds rather than on any sound legal doctrine
proving that the current law somehow allows contingency fee
contracts. Attorney General Caldwell succumbed to the
“pressure” put on him by a few sales tax collectors and
reinstated the opinion written years ago.
In doing so, he confirmed to the national business community that anti-
business political chicanery is alive and well in Louisiana.
In the Bayou State, it often seems like for every step we take
forward in improving our business climate, we tend to take two
steps backward. Attorney General Caldwell’s recent sales tax
opinion is a prime example of that syndrome. Some call it the
“Louisiana Way.” It is the path to fewer jobs and less outside
investment, things that are sorely needed in these trying
times.
Louisiana has suffered over the years from a reputation of
having politics unduly and negatively influence the business
climate of the state. Louisiana’s nearly unique system for
collecting and administering sales tax revenues is a
particular problem when the Bayou State is compared to others.
These two factors converged recently in a way that sends
another negative message regarding how Louisiana businesses
are treated in matters of taxation.
The issue centers on Louisiana’s system of sales tax
collection, in particular the lack of centralized collection
of sales taxes. In almost every other state, there is only one
collector of the sales tax: the state. The money is collected
centrally and disbursed back to the local governments in
proportion to their local rate of taxation.
Local jurisdictions pay the state a small fee to collect their
taxes; however, they save money by not having to maintain an
expensive and duplicative local bureaucracy to do the
collections. In the other states, the central collector also
conducts audits of taxpayers. If taxes have not been paid
properly, the state collects the principal, interest, and
penalties for both the state and the local taxing entities.
Businesses have to fill out only one form—not a multiplicity
of them—when they submit their sales taxes. And they are
subject to only one auditing entity—not scores of them.
Our antiquated system of sales tax administration results in
Louisiana ranking at the bottom of “tax fairness” indicators
among the 50 states. Our laws in this regard are bad enough.
Unfortunately, a recent opinion written by our Attorney
General, Buddy Caldwell, makes a bad situation worse.
Louisiana law prohibits entities that collect local sales
taxes from contracting with private auditors on a contingency
fee basis to audit sales tax returns. The logic for this is
simple: auditing entities should not be tempted to treat
taxpayers unfairly in order to increase their compensation
from the local governments. These auditors have contracts that
give them a percentage of the amount of money collected
instead of being paid a flat fee or billing on an hourly basis
to do the audits.
Some local governments have defied the law and continue to use
contingency fee contracts. They have hidden behind the fig
leaf of a flawed Attorney General’s opinion from years ago
that found the contingency contracts not in conflict with the
law. An Attorney General’s opinion is just that—one lawyer’s
opinion, not something that changes a statute.
Senator Jack Donahue requested that Attorney General
Caldwell’s office revisit the opinion written by one of his
predecessors. Caldwell’s office did that and issued two new
opinions that clearly cited legal reasons why the previous
opinion was flawed. Then politics entered the equation. The
contract auditors and the local collectors they work for
leaned heavily on Caldwell to withdraw his new opinions.
Their arguments centered upon their desire not to pay auditors out
of their own funds rather than on any sound legal doctrine
proving that the current law somehow allows contingency fee
contracts. Attorney General Caldwell succumbed to the
“pressure” put on him by a few sales tax collectors and
reinstated the opinion written years ago.
In doing so, he confirmed to the national business community that anti-
business political chicanery is alive and well in Louisiana.
In the Bayou State, it often seems like for every step we take
forward in improving our business climate, we tend to take two
steps backward. Attorney General Caldwell’s recent sales tax
opinion is a prime example of that syndrome. Some call it the
“Louisiana Way.” It is the path to fewer jobs and less outside
investment, things that are sorely needed in these trying
times.
Subscribe to:
Posts (Atom)
