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Iowa: Closed for business?

March 18, 2010

The bill limiting some of Iowa's economic development credits passed the Iowa Senate yesterday on a party-line vote. One opponent said that it was bad news for Iowa businesses, reports O. Kay Henderson:

Senator Randy Feenstra, a Republican from Hull, summed up the G.O.P.’s objections. "States around us — Minnesota, Nebraska, Wisconsin — are all increasing their tax credits to generate more business and more opportunity," Feenstra said. "It seems the states around us have a direct, opposite rationale about how to create business. Iowa reduces tax credits and it shows business and companies that we are closed for business."

Sadly, that ship sailed long ago. Iowa has the nation's highest corporate income tax rate, at 12%. Even taking account our partial deduction for federal taxes, we have the second-highest rate. We have a high individual rate. We have the fifth-worst business tax climate in the country. We aren't going to fix that by bidding against our neighbors to bribe companies to come here.

The way to fix that problem is to leave the bribery to our neighbors and instead to make Iowa a good place for everybody to start and run a business. Instead of our current high-rates and 30-odd economic development tax breaks, lets try this:

- Eliminate the corporation income tax.
- Knock down the individual rate to 4% or so.
- Get rid of our corporate welfare tax breaks, tax code clutter, and corporate welfare subsidies like Vision Iowa and the Iowa Office of Energy Independence to pay for it.

In other words, don't fight a losing battle for corporate welfare, for tax breaks that only go to people with expensive advisors and lobbyists. Fight for the Quick and Dirty Iowa Tax Reform instead!