The Cost Savings Factor

Beyond manufacturing, Louisiana offers the second-lowest tax burden for new firms of all kinds, and the state ranks No. 10 in tax costs among established companies, according to the study. The purpose of Location Matters is to measure how state incentive programs and tax rates affect the overall tax burden of new and established business investments.

Louisiana ranks No. 1 in four of the 14 sectors analyzed in the February 2012 study. Louisiana’s No. 1 rankings include the lowest tax burden for new capital-intensive manufacturing and the lowest tax burden for new labor-intensive manufacturing. The total effective tax rate in each of these sectors was less than 1 percent, the study shows.

Louisiana’s other No. 1 rankings lie in the research and development realm. The state offers the lowest tax burden among the 50 states for both new R&D facilities and established ones, with “one of the more generous (research and development) tax credits” in the U.S., according to KMPG and the Tax Foundation. In addition, Louisiana also ranks No. 2 for offering the most competitive tax burden on new corporate headquarters projects.

Louisiana’s showing is the result of a number of factors, including a series of reforms and business incentives put in place in recent years, says Steven Grissom, LED’s deputy secretary.

Those factors include Louisiana’s 10-year, 100 percent property tax exemption on industrial capital investments, its single-sales-factor income tax and corporate franchise tax apportionment for manufacturers and other competitive prospects, and its 100 percent annual rebate on inventory taxes.

The state eliminated a sales tax on business utilities and natural gas, and Louisiana enhanced its tax credit for research and development entities. Those policies are augmented by additional cost factors outside the scope of the study, such as Louisiana’s low electricity and real estate costs.

“We think it’s the right analysis, and it reflects the reforms we’ve put in place to improve the profitability and success of companies that do business here,” Grissom said.

Among Southern states, Louisiana ranks No. 1 for new firms and No. 3 for established firms, KPMG and the Tax Foundation conclude. Louisiana is one of just two Southern states to rank in the Top 10 for overall tax impact on both new firms and mature firms.

The unprecedented, nationwide analysis looks at specific state and local taxation rates for both new and mature business facilities across a range of sectors, making it the most comprehensive analysis to date by KPMG.