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Hello, hangover!

August 18, 2009

The Iowa legislature has been on a corporate welfare tax credit spree in recent years. The state now has dozens of "economic development" tax credits. Foregoing taxes for favored constituents is hard to tell from spending; in fact, many of these credits are transferable or refundable, which makes them identical to spending.

As college students quickly learn, a good binge is merely the prelude to a good hangover, and the headache has set in, reports the Des Moines Register:

Tax breaks will take a $160 million bigger bite out of Iowa's revenue this year than last, including sizable increases for movie productions and historic renovations, a state report released Monday shows.

The $478 million total projected cost of tax breaks - a 50 percent spike from the previous year - will place more stress upon an already troubled state budget, both Democrats and Republicans acknowledged.

To put this corporate welfare in perspective, the entire net receipts of Iowa's highest-rate-in-the-nation corporate income tax is projected at $376.2 million for the current fiscal year.

Like many folks who wake up after a binge with a splitting headache and a stranger in the bed, the legislators are discovering the virtues of temperance:

"I think the report shows the need not only for a cap of these credits but also for continued scrutiny so these programs don't break the bank," said Sen. Joe Bolkcom, D-Iowa City, chairman of the Senate Ways and Means Committee.

Senate Republican Leader Paul McKinley of Chariton also called for more oversight of tax breaks, which he said are heavily overused.

"Any time government gets involved in picking winners and losers rather than treating everybody fairly and the same, it distorts the marketplace," McKinley said.

Better wise late than never. Still, it's worth noting that when these guys had the chance to close down the party, they sent out for more kegs. Consider Iowa's film credit, perhaps the most outrageous special interest subsidy this side of renewable fuels. This credit was enacted in 2007 and has already risen to over $77 million in spending. Both Senators McKinley and Bolkom voted for the film credits, as did all but 3 of the 150 legislators.