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WHY THE TAX LAW IS A MESS, CHAPTER...

March 26, 2005

From yesterday's Des Moines Register:

Bills let track keep sales taxes

The owners of a proposed $70 million racetrack in Newton would be allowed to keep the sales tax revenue the facility collects over the next 10 years under bills introduced Thursday in the Iowa Legislature.

The proposal - believed to be the first of its kind in Iowa - would allow U.S. Motorsport Entertainment Corp., the developer of the track, to pocket up to $12.5 million that its customers pay in sales taxes on tickets and concession stand sales at the Newton track. Once that total amount is collected, the sales tax revenues from the track would begin flowing into the state treasury, under the terms of the legislation.

This is a fine case study of how good intentions lead to unfair and complex tax laws.

For whatever reason, some folks have decided that having a $70 million NASCAR track in Newton is a great idea -- good enough to put $12 million of taxpayer money from the City of Newton. The Vision Iowa people declined to throw in another $20 million. Some legislators are now trying to let them keep their sales tax proceeds as a back door way of financing what Vision Iowa wouldn't.

After all, they say, it's free:

"It's not money the state currently has," (Newton Mayor Chaz) Allen said. "It's not giving up anything. . . . And if the state helps the motor sports complex get going, the rest of the sales tax goes to the state coffers."

Well, not exactly. Once they do this for the track, everybody else is going to want some of that:

Some Iowa sports and entertainment leaders said the Newton track legislation could open the door for similar requests from other attractions that lure visitors to the state.

Matthew Krantz, general manager of Adventureland, the Altoona amusement park, said, "I don't know if we'd pursue it, but it would be an attractive option to look at."

The result: a free-for-all where every well-connected business and industry tries to keep their own sales taxes - and ultimately lost tax revenues, which have to be made up by less well-connected taxpayers.

TILTING THE FIELD

The legislation would also give the track an unfair pricing advantage compared to its competitors. No, its competitors aren't just other NASCAR tracks, or the Knoxville track, which seems to get by while collecting sales taxes. The competition is everywhere else somebody might spend a leisure dollar instead of the track - say a ball game, a restaurant, or a movie.

COSTS FOR EVERYONE

In addition, by adding a layer of complexity to the tax law, the provision would add just a bit more to the difficulty of complying with and enforcing Iowa's tax laws, penalizing every Iowan.

As usual, the narrow interest that would benefit from a tax break is highly-motivated and well-connected. Those that would be damaged - the rest of us - don't have a lobbyist on this issue. That is, unless State 29's secret identity is somewhere on this list.

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