What, if any, changes Iowa lawmakers will make to the state’s multimillion-dollar mix of tax incentives remains unclear as the 2020 legislative session draws nearer.
The state’s 10-member tax incentive review committee listened in Des Moines Wednesday morning as Department of Revenue officials provided overviews of Iowa’s programs — or “tax credits for dummies” presentations, said Sen. Joe Bolkcom, D-Iowa City.
Iowa is on track to be liable for $373.1 million in fiscal year 2019, factoring in 20 capped and 20 uncapped state tax incentive programs, according to the Revenue Department’s October contingent liabilities report.
The department reported, if all programs are fully awarded and all funds claimed, Iowa could be on the hook for $528.1 million by fiscal 2024 — though based on historic credit use, officials expect a lower $431.7 million in liability that year.
Committee members floated, but did not agree to form, a standing committee that could dig deeper into specific tax incentives during the upcoming legislative session.
Rep. Pat Grassley, R-New Hartford, the newly selected Iowa House Speaker, said lawmakers ought to look at modernizing the credits on the whole to ensure taxpayers are getting the most “bang for their buck.” Revisions would not necessarily have to be drastic, he added, though he said it is “premature” to discuss specific changes.
“There’s a lot of talk right now or that goes on about, ‘let’s just eliminate (the credits) and free up all this money.’ It doesn’t exactly work that way,” said Grassley, following the meeting.
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“It’s kind of a long process, it’s something that the legislature has to be very thoughtful in.”
As is, 13 of Iowa’s tax incentives are slated to expire through 2024, said Mike Mertens, policy director for pass-through entities with the Revenue Department.
Not on that list is Iowa’s research activities credit, which has drawn criticism for allowing large companies that carry out in-state research and development — such as Collins Aerospace and Deere and Co. — to collect million-dollar refund checks after claiming more under the credit than they owe in state income taxes.
Rep. Chris Hall, D-Sioux City, said the credit as it stands results in dollars “going out the door” from Iowa’s budget rather than to other priorities, such as for health care, education or parks and recreation.
“It shows where the priority has been, or at least an unwillingness to look and make hard decisions and demonstrate real leadership by the majority party,” he said after the meeting.
In potential revisions to tax credits, Mertens said, lawmakers ought to take heed of any existing contractual obligations they might have with public and private entities making use of those programs.
Because the committee adjourned without locking in a follow-up meeting date, Hall questioned his colleagues’ seriousness in revising any tax credits.
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