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Are all Iowa tax credits really under the knife?

November 20, 2009

Governor Culver has formed a panel to review Iowa's 30-odd business incentive tax credits. He sent a letter to some of his agency heads:

To assist the panel with their work, I am asking you to submit information on your respective departments’ tax credits to the Iowa Department of Management by close of business December 4, 2009. Submissions should include the following information for each tax credit program administered by your agency:

• General description of the purpose of the tax credit
• Minimum, maximum and average value of tax credits issued
• Contingency liability for each tax credit
• Number of tax credits issued each year
• Number of individuals and/or businesses served by the tax credit
• Whether the tax credit is transferable and, if so, how many times
• Whether the tax credit is refundable
• Processes for oversight and regulation of the tax credit
• The Return on Investment for the tax credit
• Data on the fiscal impact of the tax credit for the past ten years, if available
• A description of what information is currently made available to the public for the tax credit(s) administered by each agency.

Good luck computing the "Return on Investment" on the tax credits. Those numbers don't exist. They will "estimate" them, which is another word for "make it up." The agencies will assume that every job at a company receiving a tax credit would never exist without the tax credit. They will ignore the economic activity lost to the rest of the state when they take that money from you and me and give it to somebody with a good lobbyist. And they'll insist that every credit is vital to keep the state from flowing down the Mississippi.

It never makes sense to take money from some businesses and their employees to lure and subsidize their competitors. Far better to embrace the Tax Update Quick and Dirty Tax Plan.

UPDATE: A reminder: IPTV's Iowa Journal recently did a program on tax credits (video at link). On the program Rep. Shomshor says they're always evaluating whether credits are cost-effective. Now the Governor makes it sounds like a cost-benefit evaluation of tax credits is a new thing at the Statehouse. Sadly, the Governor is right, not Mr. Shomshor.

Tags: Corporate welfare.Economic development.Iowa tax policy.O Kay Henderson.Quick and Dirty tax plan.Tax credit.

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