Apple's Iowa deal ignites debate over tax incentives

Critics questions breaks for large, profitable companies

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When this Apple fell off the tree and landed in Iowa, it started a political debate about tax incentives.

Apple, the technology giant, recently announced its intention to build a $1.3 billion data center in suburban Des Moines.

Apple was lured to Iowa, in part, by more than $200 million in tax incentives. The state chipped in, agreeing to forfeit $20 million in future tax revenue from the site.

Gov. Kim Reynolds celebrated the announcement, calling it a significant investment in Iowa.

“This announcement further solidifies Iowa as a hub where innovation and technology flourish and demonstrates this is a place where world-class companies can thrive,” Reynolds said in a statement announcing Apple’s project.

Central Iowa business leaders were similarly pleased with the announcement.

But not everyone was OK with the millions of dollars Reynolds’ administration agreed to forfeit in order to get Apple to Iowa.

Critics of the state’s contribution to the tax incentives noted the forfeiture of future tax revenue comes at a time when the state is dealing with a budget shortfall that is at nearly $250 million and rising, and may require a special legislative session to finally resolve.

No future revenue from the Apple project would help the state’s current fiscal situation. But critics say the state’s willingness to forego future tax dollars shows misplaced budget priorities.

And critics note the project is expected to create only 50 long-term jobs at the plant. The project also is expected to create 500 short-term construction jobs.

Critics also question giving tax breaks to large, profitable companies. Apple had net revenue of nearly $45.7 billion in 2016, according to Market Watch.

“Apple is just the latest company to fleece Iowa, crippling our ability to invest in schools, workers and health care in the future,” Matt Sinovic, executive director of the liberal advocacy group Progress Iowa, said in a statement. “The Reynolds budget crisis was created because of fiscally irresponsible tax giveaways. How will we ever recover when the governor keeps letting companies take bigger bites of our future revenue?”

Some of the most vocal critics, unsurprisingly, were the many Democrats hoping to become their party’s nominee for governor in the 2018 election.

But some Republicans — and not just Reynolds’ gubernatorial GOP primary opponents — also questioned the wisdom of the Apple deal.

Iowa Rep. Pat Grassley, who leads the Iowa House’s budget committee, said in social media posts that he is “not convinced” the incentives package awarded to Apple “is good value for Iowa taxpayers.” Grassley said the key to bringing more high-quality jobs to Iowa is tax reform, which should include an examination of tax credits.

It seems a safe assumption that tax incentive programs will be a recurring issue for gubernatorial candidates on the campaign trail, and will be a topic of debate during next year’s legislative session.

2020 Watch

U.S. Sens. Bernie Sanders, of Vermont, and Amy Klobuchar, of Minnesota, were in Iowa this week.

Both are potential Democratic candidates for president in 2020.

Both were in Iowa on Thursday: Klobuchar gave a lecture on women and leadership at Iowa State University, and Sanders spoke at a book-signing event in Iowa City.

And former Maryland Gov. Martin O’Malley is making yet another trek to Iowa. O’Malley has planned to help fundraise for Democratic state senators next weekend in Davenport, Maquoketa and North Liberty.

Erin Murphy covers Iowa politics and government. His email address is erin.murphy@lee.net

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