Lawmakers consider evaluating Iowa tax credits
Coralville Democrat advocates review of TIF also
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James Q. Lynch
DES MOINES — A joint meeting of Iowa House committees that deal with taxes and spending might be the starting point for a review of tax credits, their value and effectiveness.
“Given the current fiscal situation, we need to consider the scope and duration and the generosity of tax credits,” House Ways and Means Chairman Guy Vander Linden, R-Oskaloosa, said Wednesday after the Legislative Services Agency presented a 50-minute catalog of tax credits.
The LSA tracks $427 million in “contingent liabilities” tax credits, another $103 million in state individual income tax credits, $74 million paid directly from the general fund and $562 million in property tax credits and exemptions.
Vander Linden wants lawmakers to look at whether the credits are doing what they were intended to do.
“In a lot of cases, it is difficult to determine,” he said. “Some previous Legislature put them in place. I hope we can go back and say it was a good idea or, maybe, it’s no longer a good idea or it’s a bad idea. We’re going to re-evaluate it.”
It won’t be easy, however, and Vander Linden isn’t sure lawmakers will be able to answer those questions about every tax credit.
Rep. Dave Jacoby, D-Coralville, is ready to give it a go. In particular, the ranking Democrat on Ways and Means wants to look at “corporate giveaways and, frankly, things that are plain ineffective.”
“I think we agree that at some point in time we have to stop writing checks to companies until we see exactly what they are bringing back to Iowa,” Jacoby said.
Vander Linden and Jacoby agreed that the businesses and individuals using those tax credits are likely to want them continued.
“One of the things we’re going to find out pretty quickly if we get serious about looking at tax credits is who’s getting them, because they will show up,” Vander Linden said.
“People will start thinking ‘Uh-oh, that means me. I need to get up there and talk to people and at least express the value in those credits,’” Jacoby added.
Both lawmakers indicated everything would be on the table if they start to evaluate tax credits. However, popular support for some may make them less vulnerable to change.
The state’s largest tax break is the $71 million Earned Income Tax Credit, a refundable tax credit for low- and moderate-income workers intended to encourage employment.
“I doubt we would scale that one back, but it’s a big one,” Vander Linden said. He doubts Democrats would go for a reduction in that “and I’m not sure Republicans would go along,” either.
Jacoby would like to see an evaluation of credits to large companies, such as the $57 million Research Activities Tax Credit available to taxpayers who increase research activities in Iowa. But he doesn’t want to stop there.
“Being from Coralville, I want to evaluate TIF districts,” Jacoby said. “I want to see if tax increment financing is truly working. Are we generating the state income tax and sales tax what offsets the cities and counties holding on to those tax receipts?”
Coralville has made extensive use of TIF to fuel development of Iowa River Landing.
Vander Linden said he’s hopeful lawmakers will tackle tax reform this year, but acknowledged that likely will depend on what the Revenue Estimating Conference reports when it meets next week.
“We’ll go forward based on what that looks like,” he said.
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