New Orleans talks constantly about supporting small businesses. Politicians praise entrepreneurs in speeches, economic development officials highlight local innovation, and city leaders regularly describe neighborhood businesses as the backbone of the local economy.
But buried deep in Louisiana’s tax structure is a policy that quietly does the opposite. We tax the tools small businesses need to operate.
Under Louisiana law, equipment owned by businesses—from restaurant ovens and refrigeration units to construction tools, office computers, and retail fixtures—is classified as business personal property and taxed through the property tax system. Every time a business owner invests in upgrading equipment or expanding operations, that investment can increase their property tax bill.
For a city whose economy depends heavily on locally owned restaurants, retail shops, construction companies, and service businesses, that policy deserves a closer look. Let’s face it. Taxing the tools people use to work is a strange way to encourage economic growth.
Small Businesses Are the Real Economy
Small businesses are not a side story in Louisiana’s economy. According to the U.S. Small Business Administration, more than 99 percent of businesses in Louisiana qualify as small businesses, and they employ well over half of the state’s workforce. Across the New Orleans region, thousands of small firms operate in industries ranging from hospitality and retail to construction, healthcare, and professional services.
These businesses shape neighborhoods. They anchor commercial corridors, and they provide the local character that makes New Orleans economically and culturally distinct. Nationally, small businesses account for roughly two-thirds of net new job creation. When small businesses grow, the local economy grows with them. Yet the tax structure they operate under often works against them.
The Tax Few People Talk About
Louisiana’s constitution classifies business equipment as commercial personal property, meaning it is taxed through the same property tax system that applies to real estate. Instead of taxing the full value of the equipment, the state first assesses it at 15 percent of its fair market value, and local millage rates are then applied to that assessed amount. In practice, this means that when businesses invest in new equipment—whether it is a restaurant installing a commercial kitchen, a mechanic upgrading diagnostic machines, a contractor purchasing new tools, or a retailer replacing aging point-of-sale systems—that investment can increase the company’s taxable property base and ultimately raise its property tax bill.
Economists have long been critical of taxes on productive equipment because they can discourage capital investment. When businesses know that purchasing new equipment may increase their tax liability, they may delay upgrades or scale back investments altogether. Over time, that dynamic can slow modernization, limit expansion, and reduce productivity, which ultimately restrains economic growth.
Louisiana’s Layered Property Tax System
The effect becomes even more pronounced because Louisiana’s property tax system layers multiple millages on top of one another.
Municipal governments, school boards, libraries, law enforcement districts, and other public bodies all levy their own voter-approved millages on the same property base.
In Orleans Parish, the combined millage rate across all taxing authorities often exceeds 150 mills. Individually, each tax may appear modest. Together, they can create a substantial burden when applied to business equipment.
Most residents think about property taxes in terms of homes, but businesses face the same system applied not to houses, but to the equipment they rely on to operate.
What This Means for a Typical Restaurant
Consider a typical neighborhood restaurant opening in New Orleans. Restaurants are equipment-intensive businesses. A commercial kitchen requires ovens, refrigeration systems, ventilation hoods, dishwashers, bar equipment, seating, and point-of-sale technology.
It is not unusual for a small restaurant to invest $200,000 to $500,000 in equipment before serving its first customer.
Imagine a restaurant invests $300,000 in equipment. Under Louisiana’s assessment rules, that equipment is assessed at 15 percent of value, creating an assessed value of $45,000. Once parish millages are applied, the restaurant may face several thousand dollars in annual property taxes tied solely to its equipment. Over time, those costs accumulate. Though for multinational corporations, that may barely register.
For a local entrepreneur navigating rising insurance premiums, staffing shortages, and unpredictable tourism seasons, it matters a great deal.
Meanwhile, Large Corporations Often Receive Tax Breaks
Louisiana’s tax system contains another reality that rarely enters public conversation. Large corporations frequently qualify for major economic development incentives such as the Industrial Tax Exemption Program, which can dramatically reduce property taxes on large industrial investments.
Small businesses rarely qualify for those programs. The result is a system where multinational corporations may receive substantial tax abatements while neighborhood entrepreneurs continue paying taxes on ovens, refrigerators, computers, and tools.
That imbalance was not deliberately designed, but it has become embedded in the system over time.
The Budget Reality
Any serious tax reform must acknowledge New Orleans’ fiscal situation. City officials have warned about potential budget shortfalls in coming years as infrastructure costs rise and population decline erodes the tax base. If taxes on business equipment were eliminated without replacing the revenue, the programs funded by those millages—from schools to libraries to public safety—could face cuts.
That cannot happen. Any reform must be structured so it remains revenue responsible. Fortunately, the scale of the revenue involved makes targeted reform possible.
In a municipal budget roughly approaching $800 million, the city’s share of property taxes generated from small business equipment likely amounts to only a few million dollars annually once revenue is distributed among multiple taxing authorities. That means reform could be implemented at a manageable fiscal scale.
A Practical Reform
Rather than eliminating the tax entirely, policymakers could implement a targeted exemption. For example, the first $25,000 to $50,000 of business equipment value could be exempt from property taxes.
Under conservative estimates, the fiscal impact on the city’s general fund would likely fall within the following range:
- roughly $500,000 to $750,000 annually for a $25,000 exemption
- roughly $1 million to $1.5 million annually for a $50,000 exemption
- roughly $2 million to $3 million annually for a $100,000 exemption
Against an $800 million city budget, even the most aggressive scenario represents well under one percent of total spending.
Why the Economic Impact Could Still Be Worth It
A targeted exemption would not immediately replace the lost revenue through new taxes. But the economic effects could still justify the policy, especially when viewed over the long term.
Consider a middle-range scenario in which roughly 5,000 small businesses qualify for a $50,000 exemption. That policy would produce about $5.5 million in tax relief across the local business community while costing the city government roughly $1.2 to $1.3 million annually. While the city would initially experience a modest revenue reduction, the broader economic impact could offset part of that loss over time.
If even 60 percent of those savings were reinvested locally, more than $3 million could flow back into the New Orleans economy through new equipment purchases, business improvements, employee wages, and contractor services. Some of that money would circulate through local suppliers and service providers. Some would become wages for workers who then spend their income at neighborhood businesses. Some would translate directly into taxable purchases that generate additional sales tax revenue.
Economists refer to this dynamic as the local multiplier effect, where money spent by small businesses circulates through the local economy multiple times.
But the multiplier effect is only part of the story.
Reducing taxes on business equipment can also lower the cost of starting a business in the first place. For entrepreneurs deciding where to launch a restaurant, open a retail shop, or start a service company, the overall cost of doing business matters. When cities reduce barriers to investment, they become more attractive destinations for entrepreneurs who might otherwise choose to locate somewhere else.
If even a modest number of new businesses chose to open in New Orleans because the financial environment became more favorable, the impact would extend well beyond equipment purchases. New businesses bring new jobs. New workers bring new residents; and, new residents increase demand for housing, which can contribute to rising property values and a broader property tax base over time.
In other words, policies that encourage entrepreneurship can create a chain reaction. More businesses lead to more employment opportunities. More employment attracts more residents. And as neighborhoods grow and housing demand increases, property values often follow. Higher property values ultimately translate into higher property tax collections for the city.
The goal of this policy is not to instantly replace every dollar of lost revenue in the first year. The goal is to remove a barrier that discourages entrepreneurs from investing in their own growth and in the city itself. When small businesses expand, they create jobs, increase economic activity, and help broaden the city’s tax base in ways that extend far beyond the initial tax savings.
In a city whose economy is powered by locally owned restaurants, contractors, artists, and small service companies, encouraging that kind of growth may be one of the most practical investments New Orleans can make in its economic future.
Other States Have Already Tried This
Louisiana would not be alone in pursuing this type of reform.
Several states have reduced or eliminated taxes on business equipment after economists concluded the tax discouraged investment.
Michigan eliminated most personal property taxes on small business equipment in 2014 while creating a state reimbursement fund to protect local governments.
Florida voters approved a constitutional amendment providing a $25,000 exemption for business personal property, specifically designed to reduce burdens on small businesses.
Other states have raised exemption thresholds or phased out equipment taxes entirely.
The common lesson from those reforms is clear that small business tax reform can prove to be an economic boon.
Most states start with modest exemptions targeted at small businesses, rather than eliminating the tax altogether.
Why Louisiana’s Tax System Looks This Way
One reason Louisiana relies so heavily on taxes applied to business assets is rooted in the structure of the state’s property tax system itself. The Louisiana Constitution provides a generous homestead exemption and assesses residential property at a lower rate than commercial property, which means homeowners pay relatively low property taxes compared with many other states. As a result, local governments historically relied more heavily on other revenue sources, including sales taxes and business-related property taxes such as inventory, equipment, and other tangible personal property.
Over time, large industrial projects also received generous tax incentives, leaving small businesses paying taxes on equipment that large corporations often avoid.
A targeted equipment exemption would help rebalance that system.
A Chance to Build a Broader Coalition
There is also a political opportunity here. Policies that support local entrepreneurs rather than multinational corporations can appeal across ideological lines.
Progressives see support for neighborhood businesses, economic conservatives see incentives for investment and growth.
Helping small businesses upgrade equipment and expand operations is grounded in pragmatism, not ideological purity.
Let Entrepreneurs Invest in New Orleans
New Orleans does not lack creativity or entrepreneurial spirit. What it often lacks is a policy environment that makes it easier for small businesses to invest in their own success.
Taxing the tools entrepreneurs rely on sends the wrong signal. Removing that barrier will not solve every economic challenge facing the city. But it would represent a meaningful step toward creating an environment where local businesses can grow.
Sometimes the smartest economic development policy is not another subsidy or incentive program, but rather it’s allowing entrepreneurs to invest in the tools they need to succeed.
