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I spent $450 million and all I got were these localized intangible benefits.

December 15, 2009

Iowa will spend $450 million on tax credits this fiscal year, and darned if anyone can tell that they do any good. That's the short version of the much-awaited analysis of Iowa's tax credits that came out yesterday.

After the Iowa Film Credit program blew up in scandal this fall, the Governor asked the state agency heads in charge of running Iowa's tax credit programs to put together a report listing the state's "return on investment" on the credits. One looks in vain at their 123-page report for a straight answer to that question for even one of the 30-odd economic development credits. The report punts for most credits by saying "It is not possible to quantify a return on investment at this time." -- even though some of these credits have been around for 8 or more years. That was the only analysis provided for $48 million Research Credit, which is certainly popular among its recipients. The report shows one unnamed big company got a $16.7 million research credit for 2007; because that was almost certainly well in excess of that company, the state wrote them a check for the difference, courtesy the rest of us taxpayers.

The lack of any quantifiable benefit for the taxpayers sent the loophole lobbyists scrambling to defend their subsidies:

"We applaud the effort to put this forward, but we certainly want to be sure they continue to look at the credits more in depth," said Ed Wallace, president of the Iowa Taxpayers Association, whose 154 members use many of the state's incentive programs. "These are really, really important programs to many companies. There are thousands of jobs at stake ... and millions of dollars in capital investment in different parts of the state."

No doubt the company that got that $16.7 million check really thinks it important to continue to get more of our money.

The report describes the benefits of the notorious film credit program:

Fiscal benefit to the state treasury is limited, however, other intangible and/or more localized benefits may exist. Growth in existing film, media and video infrastructure (personnel, technical expertise, etc.) has occurred over the past two years in Iowa. Even with these benefits considered, positive fiscal impact to the State treasury is not expected under current program structure

Intangible benefits like T-shirt purchases and tony parties! Let's spend another $300 million!

The lobbyists will certainly say we shouldn't be hasty about getting rid of these credits until we know whether they provide a benefit when the hearings on the credits open today. That's a funny way of looking at things. Most people like to know what the benefits are before they commit to spending another $566 million.

No doubt some folks will say that we need these credits to remain competitive, that we have no choice. For these people, I recommend the Tax Update's Quick and Dirty Iowa Tax Reform.

Related: Mismanagement: it's not just for film credits!

Tags: Corporate welfare.Economic development.film credits.harold hill.Iowa tax policy.James Q Lynch.Lee Rood.Quick and Dirty tax plan.Tax Credit Report.tax credits.

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