Staff Columnist

Iowa needs a serious review of bloated tax credits

The Gazette

The House chamber at the State Capitol Building in Des Moines.
The Gazette The House chamber at the State Capitol Building in Des Moines.

Republicans who run the Statehouse are not serious about taking a deep dive into Iowa’s large, expensive pool of business tax breaks and credits, with hopes of finding what’s worth the money and what needs to be scrapped.

Otherwise, why would lawmakers promise a review as they passed a $1.5 billion package of tax cuts in 2018, only to put off appointing a special legislative committee until 2019? That committee wasn’t authorized until July, and wasn’t appointed until September. It met for the first time last week, for barely two hours, with lawmakers receiving mostly rudimentary background information regarding tax credits for businesses and other interests, their scope and history.

One lawmaker called the meeting “Tax Credits for Dummies.”

Will the panel meet again to make recommendations to the Legislature before it reconvenes in January? Maybe. Maybe not.

Iowans deserve better than this. Republicans who often tout their fiscal skill for holding the line of excessive state spending and racking up a budget surplus don’t have the same zeal for exploring the impact of tax credits, which total $373 million this year and will soon exceed $400 million. They have the same budgetary effect as spending.

Some tax credits go to encourage historic preservation projects, or the development of renewable energy and biofuels. Most go to businesses as part of the state’s economic development efforts. Some are refundable, meaning that if a credit’s value exceeds a firm’s state tax liability, the business will receive a check for the difference.

With tax credits, intentions often are good, but evaluation is weak. Both parties have voted for a long list of breaks. What Iowans actually are getting for all this revenue diverted from education, public safety, environmental protection and other priorities often is cloudy. Rosy development anecdotes take the place hard facts. Refundable tax credits, in particular, should receive higher scrutiny.

It’s lawmakers’ job to cut through the spin, find out the real story and protect taxpayer funds. That’s not going to happen through a process that simply skims the surface and moves on.

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With some GOP lawmakers taking about more tax cuts, the need to properly evaluate tax credits on the books becomes even more urgent. In particular, if Republicans consider a cut in what they see as Iowa’s high corporate tax rates, how is it fiscally responsible to permit a web of other business income tax credits to remain in place?

It’s time, past time, actually, for the Tax Credit Review Committee to take its job seriously.

Comments: (319) 398-8262; editorial@thegazette.com

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