Explaining Southern California's economy

Econ 474: What's a tax credit?

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Chris Arnold/NPR

A sign in Maui, Hawaii, urges people to buy before the $8,000 tax credit expires. Both individuals and businesses can get credits.

Yesterday, I wrote a post about how Louisiana is offering aggressive tax credits to the gaming and software industries in an effort to lure them to what I dubbed "Silicon Bayou." Louisiana, along with many other states, offers tax credits to encourage business activity and relocation.

But how do tax credits work?

There are basically two types of tax credit: refundable and non-refundable. The latter can lower a business' tax bill to zero, but not turn into a cash refund if the amount takes a tax liability lower  than zero. The former can result in a check being cut by the state or IRS, as a refund. 

This can work about particularly well if a company is eligible for a tax credit and is losing money — as several producers of pulp, the raw material that goes into paper, learned in 2009, when big companies such International Paper received billions from the Treasury for exploiting a credit that was originally aimed at encouraging alternative-fuel use. A byproduct of pulpmaking is something called "black liquor," which paper mills have for a very long time cycled back into their systems and burned to provide power.

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Welcome to Silicon Bayou: Louisiana is coming after California's gamers

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Matthew DeBord/KPCC

The good people of Louisiana want to steal our gamers! They've sent a food truck to E3 to entice Californians to cone to "Silicon Bayou."

You never know what you're going to find when you stagger out into the sunlight after watching a preview of the latest zombie-apocalypse videogame. But that's exactly what happened to me at Day 1 of the Electronic Entertainment Expo, or E3, the big computer and video-game trade show that's taken over the Los Angeles Convention Center.

"ZombiU," the new game from Ubisoft, does looks pretty darn scary. It also seems to be set in London, which somehow makes it even scarier — you can watch the trailer here, be warned, it isn't for younger viewers! I'm not even sure it was for me, so I made a dash for sunlight and ran right into...a food truck from Louisiana! Giving away alligator (sausage) and fried shrimp po'boys! And root beer! And two kinds of chips! 

But also providing helpful information on why, if you're involved in the gaming industry, you might want to come to work or set up shop in the Pelican State. I spoke with Heath Williams, the Director of Digital Interactive Media from Louisiana Entertainment and Louisiana Economic Development, who was completely unapologetic about bringing his state's fine cuisine right to the very heart of the California gaming industry, a roughly $2.6-billion-per-year business (and about $5 billion nationally).

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