On Topic: Why tax breaks aren't the worst thing

Coralville City Administrator Kelly Hayworth, Cedar Rapids City Manager Jeff Pomeranz, Cedar Rapids developer Steve Emerson and ISU economist Dave Swenson were part of a business panel sponsored by The Gazette on Feb. 9. (Rebecca F. Miller/The Gazette)
Coralville City Administrator Kelly Hayworth, Cedar Rapids City Manager Jeff Pomeranz, Cedar Rapids developer Steve Emerson and ISU economist Dave Swenson were part of a business panel sponsored by The Gazette on Feb. 9. (Rebecca F. Miller/The Gazette)

Why give tax incentives to ethanol companies, Iowa State University economist Dave Swenson reasoned, when they’re going to have to come here anyway?

Iowa, after all, is where the corn is.

To be clear, he’s not against using incentives entirely, but more as what he sees as an overuse — they’re good for aiding blighted parts of a community, bad as an all-purpose, any-occasion economic tool.

“A lot of the money is being used for firms that would have expanded or located here nonetheless,” Swenson elaborated. “We can’t distinguish between the needy and greedy, and the public ends up paying more than it needs to for economic activity.”

Swenson made his remarks as part of The Gazette’s business panel discussion earlier this month at the Cedar Rapids Public Library. Our topic was “Creating Development Incentives for Our Communities.”

You should have been there. Some 90 business and civic leaders turned out to hear, and ask questions of, a panel consisting of Swenson, Coralville City Administrator Kelly Hayworth, Cedar Rapids City Manager Jeff Pomeranz and developer and Aspect President Steve Emerson.

A rousing time was had by all.

But still, a broader stroke of Swenson’s brush — that giving large wheelbarrows of money or allowing hefty tax breaks to companies can amount to “corporate welfare” — has been with us since Ralph Nader was feeling his Wheaties.

As recently as in a Feb. 15 release, the Iowa Public Policy made much of figures from the Iowa Department of Revenue that showed the amounts of Research Activities Credits provided to companies doing business in this state.


If you rack together six-year totals from 2010 to 2015, as the IPP did, Rockwell Collins was at the top, with $78 million. The avionics giant received $12 million in 2015 alone.

After that, in six-year clumps, was Dupont with $45 million and Deere and Co. at $67 million. The numbers dropped dramatically after those three, with John Deere Construction coming in next with “only” $18 million.

You can see the Revenue Department’s breakdown for 2016 at http://urltrim.co/4dBirY.

In its statement on the figures, the IPP described the tax credits as “lucrative” and “refunds.”

State Sen. Joe Bolkcom, D-Iowa City, when speaking with Gazette statehouse reporter Rod Boshart about the latest credit totals, characterized them as “Christmas in February” for Iowa businesses.

Yes, these are big numbers, worthy of vigorous oversight. Amen.

But just for the sake of a calm, reasoned discussion, surely there is something positive to be said for incentives, tax credits and other economic-development mechanisms, right?

Speaking specifically of Cedar Rapids flood-damaged historic buildings during that Feb. 9 panel, Emerson noted, “ The costs are much higher up front to be able to redevelop them, and if you don’t develop them they are just going to sit there and degrade further.”

Pomeranz, speaking as city manager, said, “It is certainly our style in Cedar Rapids, if we see a good project, we don’t want to let it go, if it makes sense for our city, if it creates jobs and creates vitality.”


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Can we agree that sometimes — not always, not in every instance — the state or cities need to step in? On targeted occasions, investing now — not always with eye-popping amounts of cash or tax breaks — can yield dividends later on.

Research and development, for example, costs money, lots of it. While highly skilled, specialized researchers, working with expensive equipment, are developing new products to bring to market, they usually are not adding in a dime to the bottom line.

And we know empty plots of dirt or abandoned hulks of buildings don’t create jobs or contribute property or payroll taxes.

I know many of you will not agree with this position. Please scroll back up to where I wrote the part about not always, not in every instance.

But sometimes, after proper consideration, it makes sense, yes?

All right, let the pillorying, from the left and the right, begin.


Upcoming calendar items:

l This month The Gazette will launch Iowa Ideas, a series of statewide symposia on Iowa-specific topics. Our first event, on Feb. 28, will be held in Cedar Rapids.

Go to IowaIdeas.com to see how you can take part.

l In conjunction with the events, we’ll also debut a new magazine, to be published every other month. Our first edition will be part of The Gazette’s March 5 edition and sent out to symposia attendees. Go to http://www.thegazette.com/IowaIdeas for an advance look.

l Michael Chevy Castranova is business editor of The Gazette; (319) 398-5873; michaelchevy.castranova@thegazette.com



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