Staff Columnist

Iowa lawmakers finally review revenue-sucking tax credits, but only briefly

The State Capitol Building in Des Moines on Wednesday, January 15, 2014. (Stephen Mally/The Gazette-KCRG TV9)
The State Capitol Building in Des Moines on Wednesday, January 15, 2014. (Stephen Mally/The Gazette-KCRG TV9)

The Legislature’s Tax Credit Review Committee met at long last. And from the beginning, its mission was clear.

“I guess we’re here to review tax credits,” said the committee’s co-chairman, state Rep. Lee Hein, a Republican farmer from Monticello, as the meeting began at 10 a.m. last Wednesday at the Statehouse.

“I’m here under protest,” Hein joked. “I’d like to be running the combine.”

Who could blame him, with snow on the way? But, really, there was no reason the Tax Review Committee’s work had to interrupt the harvest.

After all, the committee originally was mandated as part of a $1.5 billion package of tax cuts and changes approved by the Republican Legislature in the spring of 2018. Critics of big new tax cuts pointed to budgetary holes already being blown open by big old tax credits handed out to large businesses and other interests. So Republicans agreed to create a committee. After the election, of course.

But the committee wasn’t authorized until July 2019, and wasn’t appointed until nearly autumn. The agenda for its Wednesday meeting came out on Tuesday.

So Hein had to leave the combine, but not for long. Because instead of a deep, substantive dig into Iowa’s pile of tax credits, the committee opted for minimum tillage.

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“We’re here to learn and be educated,” said co-chair Sen. Jake Chapman, R-Adel.

But school let out early. A meeting scheduled to run from 10 to 2:30 p.m., with a break for lunch, wrapped up by noon.

There was a history lesson. Tax credits were born amid the farm crisis of the 1980s as lawmakers looked for ways to spur economic growth, and grew through the 1990s. In 2010, after a scandal involving film industry credits, lawmakers tried limits and more oversight.

But, between 2005 and 2019, income tax credits for businesses, historic preservation projects, renewable energy and other interests totaled $4.24 billion. The total in 2019 alone is $373 million, soon to be more than $400 million. And that number doesn’t include other big ticket tax breaks such as sales tax exemptions. In 1983, there were 20 exemptions on the books. Now there are 103.

Rep. Dave Jacoby, D-Coralville, asked if there’s data showing whether the credits’ benefits outweigh the revenue loss.

“No,” said Jeff Robinson of the Legislative Services Agency.

Department of Revenue staff explained that the state paid out $211 million in “refundable” credits in Fiscal Year 2019. That means if a tax credit exceeds a business’s state tax liability, the business gets a check from the state for the difference.

Lawmakers learned that some tax credits are evaluated, but not all. And that repealing or sun-setting credits would be difficult, given all the contracts and multiyear commitments. Passing them is easy, quitting them is complicated

Then the meeting became a debate over meetings.

Democrats want another meeting before the Legislature returns. Republicans who run the joint didn’t rule it out, but wouldn’t commit.

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“I’m disappointed that this is it,” said Sen. Joe Bolkcom, D-Iowa City, who said his constituents want to know why the state is giving tax credits to wealthy companies while education and other priorities are fiscally squeezed.

“I wouldn’t say this is it,” Hein said.

But this doesn’t look in any way like a serious push to prune our pricey thicket of tax breaks, sucking revenue away from other stuff we care about — clean water, accessible mental health care, affordable higher education, etc. This looks like going through the motions.

Lawmakers could have been sent this background information months ago, preparing them to sit down and do some real work. Instead, as Bolkcom put it after the meeting, we got “Tax Credits for Dummies.”

But this is hard, folks.

“I think it’s being oversimplified how easy it is to make adjustments,” said Rep. Pat Grassley, the incoming House speaker. A couple of years ago, Grassley proposed capping tax credits and ending refundable credits. It was a bold move.

On Wednesday he repeatedly mentioned working with “stakeholders,” namely the interests that benefit from credits. Many sent lobbyists to the meeting.

“This should really be about working with the stakeholders in the room, find out what things are working and aren’t working,” Grassley said.

Rep. Chris Hall, D-Sioux City, argued what’s not working is the tax credit review process.

“So we’ve been waiting for two years running, and there’s no agreement from the committee members or chairs on what to do or how to proceed. I question how seriously we can review the issue,” Hall said.

So no ground was broken. Tax credits remain deeply rooted. Hein got back to his combine. The stakeholders can rest easy. Everybody wins.

Comments: (319) 398-82626; todd.dorman@thegazette.com

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