Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

GEE, WE'RE DRINKING A LOT. SHOULD WE SLOW DOWN? LET'S DRINK ON IT.

April 23, 2007

Iowa is inn the middle of a frenzy of new tax credits for everything from moviemaking to soy-based transformer fluid. In spite of all the fun, the destruction of the state's income tax base is starting to bother some legislators. A little, anyway.

"There is an awful lot of concern about the volume of tax credits and their impact on the budget," said [Iowa Department of Economic Development] director Mike Tramontina. Legislators, especially Sen. Joe Bolkcom, D-Iowa City, have said tax credits need to be studied and possibly reined in. He points to an Iowa Department of Revenue report released this month that shows rapid growth in the awarding of tax credits, from $110 million in the 2000-2001 fiscal year up to $312 million in the first two-thirds of the fiscal year.

But the legislature won't stop drinking the tax credit hooch just because they're starting to see double. The current session will see a massive increase in "economic development" tax credits, which just means taxing existing businesses to lure and subsidize their competitors.

$312 million is about the net amount raised in the last fiscal year by the entire Iowa corporation income tax. I'm willing to bet that repeal of the corporation income tax would do far more for Iowa's economy than more tax credits to feed the Iowa ethanol and biofuel bubble. But that would mean no more press conferences to announce the opening of the newest ethanol ethanol plant that will be unused and empty in 10 years. What good is economic development if a state senator can't cut a ribbon, anyway?

      Bookmark: del.icio.us • Digg • reddit