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Spending run through a tax return is still spending

February 08, 2010

The state issues a report saying that it can't show that a single one of Iowa's economic development tax credits does any good. So the legislature responds by eliminating the credits and lowering tax rates for everyone, right?

Well, no. Unfortunately this press release from Brad Zaun, a state legislator who is running for Congress, isn't an unusual reaction:

Let's create jobs, not raise taxes

We should utilize the Tax Credit Review Panel’s recommendations to create common sense solutions – not use it as an opportunity to create a crisis and then propose to solve it by increasing taxes on hard working Iowans. This is not the time to be raising taxes – we should instead be working together to find common sense solutions that will create and retain private sector jobs.

A subsidy is a subsidy is a subsidy. Running it through the tax return doesn't transform it to a "tax cut." The only tax cuts worthy of the name are those that are broad-based and go to all similarly-situated taxpayers. When you give a tax break only to taxpayers who jump thorugh a bunch of hoops, it's a subsidy.

Worse, when you have subsidies for specific activities -- say, for ethanol, or windmills, or biodiesel, or "research" -- you take for granted that the State of Iowa has any clue about where taxpayers should invest. Fat chance of that. These subsidies inevitably go to those who can afford the necessary lobbyists and fixers.

If you really want to encourage growth, you need a tax plan that works for the rest of us -- something like the Quick and Dirty Iowa Tax Reform Plan.

Tags: Brad Zaun.Corporate Welfare.Economic development.Quick and Dirty tax plan.tax credits.

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