Panel recommends eliminating some tax credits

By Charlotte Eby

Des Moines Bureau 

DES MOINES – A panel formed by Gov. Chet Culver to study the state's tax credit programs is calling for the elimination of eight credits, including the film tax credits that have been the subject of investigations, as well as caps on credits and other reforms.

            The seven member panel is expected to vote on the recommendations at a meeting this morning.

            The panel's report recommends eliminating programs they say have either not been fully utilized, are no longer necessary, have been improperly managed or the resources for the credit have been exhausted.

            The programs they propose eliminating are the investment and expenditures film tax credits, and tax credits for assistive devices, disaster recovery housing projects, early childhood development, economic development regions, and two venture capital tax credits.

            The panel's report also recommends that all business-related tax credits be subject to an overall $185 million cap and that all tax credits be subject to a five-year sunset to provide greater accountability.

            Recommendations also call for eliminating transferability provisions for all tax credits and ending the policy of allowing companies to collect refunds on the state's research activities tax credit. The panel proposed no changes for the state's earned income and motor fuel tax credits, but recommended that a tuition and textbook tax credit on the state income tax return be restricted to taxpayers with annual gross incomes of $45,000 or less.

In a letter to Culver, Richard Oshlo, the interim director of the Department of Management, said if the recommendations were adopted, the state would have about $55 million more in available revenue in fiscal year 2011 and $106 million more in 2012.

The report said it is virtually impossible to identify what is being “spent” in the form of tax credits each year.

“Without greater transparency, it is very difficult for taxpayers to determine whether tax credits have been effective in generating economic activity and helping businesses start up and become competitive,” the report said. “It is also difficult for state policy makers to predict the impact of tax credits on the budget.”

The panel is recommending that the state's Revenue Estimating Conference include the types and amounts of tax credit claims included in its tax receipts calculation at each meeting.

            That would allow the public and state policy-makers to more fully see the impact of tax credits on the state's general fund budget, the report said.

Charlotte Eby can be reached at 515-422-9061 or chareby@aol.com.