Staff Columnist

Iowa tax credit study arrives late, without a hall pass

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)

Hey, kids, if you’re late to math class this week, tell the teacher you’re just practicing to be an Iowa legislator.

Back in May 2018, when Republicans who run the Golden Dome of Wisdom approved a $2 billion tax cut package, they included a provision directing lawmakers to conduct a study on the long list of pricey tax breaks and credits already on the books. It’s been suggested, including by your columnist, not all of these special interest revenue giveaways are worth the hundreds of millions of dollars they divert from other priorities, such as schools, public safety or environmental protection.

That study was supposed to be conducted during the interim between the 2019 legislative session and the 2020 legislative confab starting in January. The 2019 session ended in April. The Legislative Council didn’t get around to authorizing the Tax Credit Review Committee until July. As of this moment, the committee has not been fully appointed, only House Republican and Senate Democrats have been named, and no meetings have been scheduled.

“I would have liked to start the process a little sooner,” said state Rep. Lee Hein, R-Monticello, chairman of the House Ways and Means Committee, which makes him the top House Republican on tax issues.

Hein, who will co-chair the interim panel, says he hopes the committee will meet in September. He expects 10 lawmakers on the panel will come up with a list of tax credit questions that can be explored by legislative staffers. Then it can reconvene in November or December to receive answers.

“My hope is we get a basic understanding,” Hein said.

Sen. Joe Bolkcom, D-Iowa City, Senate Democrats’ top tax expert who will serve on the Tax Credit Review Committee, is skeptical such a process will lead to pruning our unruly tax credit thicket.

“If you were to sit down and try to understand this, it would take hours to explain how it works and who gets it. Just the basics, a tutorial on the top three credits, takes a day to explain,” Bolkcom said. “Then you’re off to the races on, is it working? Is it too generous? Do we need to improve it? Is it really an incentive? What do other states do?

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“It’s impossible to outsource it (to staff). The subjective part of deciding whether it’s working or not is completely up to policymakers, where it should be,” Bolkcom said.

Bolkcom said there should be a standing legislative budget subcommittee that explores tax credits, just like panels that delve into department budgets every year. Business credits absorb $400 million in revenue annually, which eclipses the budgets of many state agencies.

Hein said Democrats talk a good game when it comes to cutting credits, but when he asked them to submit ideas on which ones to slice, he received no proposals. He said the only way to attack credits is through a “major overhaul” of the tax system.

I doubt such an overhaul will spring from a couple of committee meetings this fall.

So you see how we got to where we’re at. Tax breaks are forever. Political will is absent. The influential interest groups that convinced lawmakers to approve giveaways want to keep them, and the last thing they want is an honest, deep dive into their merits. If anything, they want more cuts. And they’re likely to get them.

As of 2010, according to a Department of Revenue report, all of the tax cuts, breaks, credits and exemptions approved by lawmakers over the past 20-plus years added up to $12.1 billion annually. That’s more than the entire state general fund budget.

The department was scheduled to add up “tax expenditures” again in late 2017, but claimed it could not issue the report due to budget constraints. Due to a lack of revenue, we can’t add up lost revenue. The report has never been completed, and I’m told there are no plans to finish it.

It’s as if the powers that be want this issue to go away, quietly. After all, Republicans kept control of the Statehouse in 2018, so why rankle any big business pals who helped bankroll that victory? And who knows? Apple might need a new server farm.

Why explore whether these breaks and credits actually accomplish anything for Iowans in exchange for the hundreds of millions of dollars they siphon off? What taxpayers don’t know won’t hurt them.

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It will, however, hurt universities, public schools, child protection efforts, the state patrol, our courts system, public health functions and all sorts of other “priorities” with stunted budgets.

But, hey, they’re doing a study. Just don’t expect them to do the math.

l Comments: (319) 398-8262; todd.dorman@thegazette.com

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