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Don't spend less; reduce expenditures instead!

March 26, 2009

Labor leaders and consumer advocates say the legislature should consider eliminating a host of state tax credits before slashing the state budget

We've said this before, but it obviously needs repeating: tax credits are the same thing as spending. The only difference is that the cash comes out earlier in the revenue cycle. If your paycheck is being garnished to pay a bill, you don't think you're any less out the money just because it's gone before you get it. Tax credits just spend the money before the state has it.

An Op-ed by State Senator Hagenow in the Des Moines Register today defends some of these credits:

The proposed fiscal year 2010 budget takes away the Research Activities Credit, which helps companies like Monsanto, Pioneer, Cellular Engineering Technologies and Kemin Industries develop new technologies and add high paying jobs in Iowa. Elimination of this credit would adversely impact our economic growth. This is the type of government program which should be expanded, not cut back.

If you wouldn't vote to have the state cut a check to Monsanto, you shouldn't want them to get a targeted credit, either. It just increases the taxes on those of us without good research credit consultants or lobbyists.

If you qualify for one of these credits, of course, you'd be foolish not to take it. But that doesn't mean it's wise for the state to offer it.

Tags: corporate welfare.economic development.state tax policy.