Focus on property taxes, Governor

By The Gazette Editorial Board

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Hitting one business with a big tax increase to provide tax relief to other businesses sounds like a bad idea. And such a proposal seems especially odd coming from Republican Gov. Terry Branstad, who won in November, along with other GOP candidates, after arguing strenuously that high taxes kill jobs and sap growth.

We agree with that assertion. But when the business in the taxation cross hairs is a casino, apparently all bets are off.

Branstad has proposed increasing the state tax rate on casino profits from 24 percent to 36 percent. He would use the proceeds from that 50 percent tax jump to help pay for plans to reduce commercial property tax rates and to slice Iowa's top

corporate income tax rate by

50 percent.

Maybe you gamble, and maybe you don't. Perhaps you believe gambling is bad for Iowa - understandable, given the social costs.

But like it or not, gambling has been an industry in Iowa for more than two decades, and it's here to stay. It employs thousands of people across Iowa. It weathers economic downturns better than most sectors. It provides revenue to local non-profits for many needs. It has bankrolled programs such as Vision Iowa, CAT and I-JOBS that spread gaming proceeds to scores of community-changing projects.

Branstad campaigned against gambling expansion, but his tax plan would harm existing casinos. Although we're skeptical of the doomsday scenarios painted by gambling interests, we do think the higher tax rate will do harm. Jobs may be lost, and non-profits will see their share of profits shrink.

We agree with Branstad that the Legislature has a historic opportunity to do something about commercial property tax rates that are a true burden on business, small businesses in particular. But with state revenues rising amid an economic resurgence, we believe good reforms can be accomplished by tapping existing revenues.

We're less enthusiastic about Branstad's $200 million corporate income tax cut, which would slice the top 12 percent tax rate in half. Branstad contends that the cut will attract new businesses.

Economists, including Iowa State University's Dave Swenson, argue that multiple loopholes, credits and federal deductibility mean many corporations in Iowa pay little or no income tax, let alone

12 percent. Businesses looking for sites will probably figure that out.

And Swenson doubts that such tax relief for those who do pay more, including big-box retailers, will really stimulate much investment or job growth in the state.

Branstad should focus on property taxes and fold on his other shakier bets.

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