Iowa grad students pitch tax incentive to fight ‘brain drain’

Iowa could make a dent in the enduring problem of 'brain drain” - students getting college degrees here but taking their know-how with them to accept good jobs elsewhere - if it offered state income tax breaks of half or more to certain students, graduate and professional students from all three public universities propose.

The 'financial retention incentive,” which the students will present next week to the Board of Regents, proposes an income tax break for Iowa-educated graduate- and professional-level students who get jobs in the state after graduation.

The 50 percent tax break incentive, which would apply to such students from both public and private universities in Iowa, would be available for the first five years after completion of a program. The incentive would increase to a 75 percent break for those willing to locate to rural Iowa for five years.

The graduate and professional student government leaders at the University of Iowa, Iowa State University and the University of Northern Iowa who developed the proposal submitted it this month to Gov. Terry Branstad for inclusion in his proposed 2016-17 education budget.

A spokesman for the governor's office indicated Wednesday it would be up to lawmakers to decide what to do. Branstad 'will carefully and thoughtfully review any legislation that is passed by the Legislature and comes to the governor's desk,” said spokesman Ben Hammes.

The students are meeting with lawmakers to drum up support 'if the governor does not plan to include it in his education budget,” said Josh Schoenfeld, a UI doctoral student and president of the university's graduate and professional student government who helped create the proposal.

The proposal - which would apply only to the state's graduate and professional students - highlights economic challenges facing Iowa, including workforce shortages for both middle- and high-skilled jobs. A recent Batelle Report issued by the Iowa Economic Development Authority articulated the problems, calling the limited availability of a skilled workforce a 'major area of concern.”

'Combined with Iowa's weak population growth, this workforce problem is likely to plague Iowa for many years to come,” according to the report.

The proposal suggests that by retaining more young, Iowa-educated workers, the state can combat a stagnant population growth and 'combat the scepter of the brain drain problem.”

In preparing the proposal, the graduate and professional students researched the likely impact of tax incentives and found potential. With an incentive, the percentage of such students who said they would likely, very likely or definitively consider remaining in Iowa increased from 48 to 83, the report said.

The percentage of those who said they could be financially encouraged to consider moving to rural Iowa was 56 percent, compared with 17 percent.

Because not all graduate and professional students have college debt, the group is proposing a tax break instead of a tax credit on loan payments.

Sen. Bob Dvorsky, D-Coralville, said students gave him a copy of their proposal and he thinks it's something the governor should consider.

'We have been talking about the so-called brain drain and people leaving Iowa, and I think we might want to actually start looking at some ideas on how to keep people here,” Dvorsky said.

Nancy Quellhorst, president and chief executive officer of the Iowa City Area Chamber of Commerce, said she thinks any concern about loss of tax revenue likely would be overshadowed by a long-term economic benefit.

'I think it's an investment,” she said. 'If you can establish that initial connection, there is a reasonable likelihood that people will establish roots and be here for the long-term.”

Quellhorst said she doesn't necessarily think the idea is the 'silver bullet” solving the need to fill more skilled jobs, particularly in the technology sector. 'But anything we can do to give them a nudge is going to be helpful.”

Even though students qualifying for the program would pay a lower tax for five years, Gary Steinke - president of the Iowa Association of Independent Colleges and Universities - said he doesn't think Iowa would suffer losses.

'If you are keeping smart productive people in the state who are going to be professionals and paid a good wage, they are going to become taxpayers, and I'm not so sure you're going to lose money,” he said.

Neil Vezeau, an ISU senior from Sioux City leaning toward continuing his education at Iowa State's College of Veterinary Medicine, said he could be motivated by a tax incentive.

'There are a lot of things that I want to do in life, but a lot of those things happen to be happening in Iowa,” he said. 'It's too soon to make the call, but the tax incentives could tip me to stay.”