Accountability is good for tax breaks, too

Mike Owen

Mike Owen

The Des Moines Register has an interesting editorial today about the state’s voluntary preschool program. The Register is asking for accountability:

“Before lawmakers consider any new education reforms, they should ensure that the changes they made a few years ago are helping.”

Hard for anyone to argue with that. Advocates of preschool surely would not fear a legitimate review. And what better time to review and adjust a program than its early years?

Now, wouldn’t it be interesting to see the same concept applied to Iowa’s many tax breaks for corporations? Do they do any good? There is no evidence that they do for the most part, a fact ignored routinely by the Iowa General Assembly and our Governors past and present, but they just keep on going. The idea of a review of tax breaks only gets lip service from most lawmakers; there are no serious reviews and no teeth in state law to require them.

The Research Activities Credit alone is a program crying out for this kind of scrutiny, a point clear from the few details that are available (See http://www.iowafiscal.org/2012research/120221-IFP-RAC.html). Unlike the preschool program, in which 9 out of 10 Iowa school districts participate, the RAC is used by a relative handful of companies in Iowa, well under 200, and is dominated by less than 10.

The money is not all that different: $58 million in 2011-12 for preschool through the state formula vs. almost $48 million for the RAC in 2011 — with $45 million of that paid in “refund checks.” These are not refunds of taxes paid, and they don’t even reduce taxes. Instead, millions go to big corporations such as Rockwell Collins, Deere and DuPont that owe so little in income tax that their tax credits are far above the amount of taxes they owe.

What’s good for the goose of preschool is certainly good for the gander of tax breaks.

//EDITOR’S NOTE: The next annual report on the use of the Research Activities Credit is due Feb. 15 from the Iowa Department of Revenue. Stay tuned!//

Posted by Mike Owen, Assistant Director

Explore posts in the same categories: Budget and Tax, Economic Opportunity, Organization

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