Rockwell Collins, John Deere and Dupont … were among 133 corporations that paid no state income tax but received checks from the state totaling approximately $43 million. (Newton Independent, Feb. 11, 2011)
News item Feb. 16: Deere reports doubled earnings:
Deere & Co., Iowa’s largest manufacturing employer, doubled its first quarter profits to $513.7 million, or $1.20 per share from $243.2 million, or $0.57 per share, for the same period last year. (Des Moines Register, Dan Piller blog, Feb. 16, 2011)
The first story cited a report from the Iowa Department of Revenue that shows Deere & Co. clearly reaped a windfall from the Research Activities Credit (RAC). Deere received at least $10.6 million, and quite possibly more, from the State of Iowa in 2010 above what it owed in income tax to Iowa. Deere was among 133 companies that paid no income tax to Iowa but still received checks from the state because their research credits were so large. Over 95 percent of corporate RAC claims were used not to offset taxes, but were paid out as checks to companies with no taxes owed — over $43 million in checks.
Deere has done nothing wrong. It has only taken advantage of special breaks offered by Iowa law. But this raises seemingly unavoidable questions of public policy, of priorities in spending. Somehow, lawmakers have avoided those questions.
Deere’s windfall in 2010 came without any review by the Iowa General Assembly or the Governor. This spending was done through the tax code. At the same time, Iowa school districts dealt with budget cuts, as did other agencies throughout state government. In some cases, property taxes rose because there were — we were told — insufficient state revenues.
The RAC report shows more revenues are available if lawmakers choose to seek them by cutting spending through the tax code. In the case of “tax credit refunds” like the $10 million-plus received by Deere and the $43 million spread across 133 companies, they could be eliminated, the money saved, and not one dime raised in taxes. Even if they were only scaled back, it would save money and cause no tax increase.
And that’s only one “tax credit” program that drains money from the treasury. There are others, and there also are loopholes that lawmakers have refused to plug.
But lawmakers’ choice, to this point, has been to leave that spending alone.
Posted by Mike Owen, Assistant Director