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GOVERNOR CULVER TURNS TO THE BOTTLE

January 15, 2008

The Des Moines Register reports that Governor Culver will propose doubling the state's five cent bottle deposit, but with a new twist: you would pay a 10-cent deposit, but you only get eight cents back when you return the empties. One cent would go to the retailer, and the 10th cent would go to the state.

This is part of the treatment for the fiscal hangover left by last year's spending spree. It's sad that so much effort is being spent on a penny-ante tax scheme when the Iowa really needs to tend to its dysfunctional revenue system. Every aspect of Iowa's tax system is a mess, from our highest-rate-in-the-nation corporate income tax to our property tax. Yet our lawmakers only seem interested in making it worse with more targeted tax credits, while trying to patch things up with stupid things like this penny bottle tax.

What's even sadder is how much could be accomplished by wiping the slate clean of our dozens of targeted tax breaks, especially on the corporation side. Economist Martin Sullivan points out ($link) that Iowa such a high "leakage" from its 12% corporate rate that a better designed corporate tax could have a rate around 3% with no revenue loss. With some modest reduction in state spending - like getting rid of the useless "Grow Iowa Values" corporate welfare scheme and the ridiculous Iowa Office of Energy Independence - you could get rid of the corporate income tax altogether. It's hard to imagine "Grow Iowa Values" will attract more business to Iowa than a 0% corporation tax rate would. But what would "economic development officials" do with their time then?

Tags: Iowa tax policy.

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