A brief, shining moment

It is not too late for Iowa lawmakers to address these issues and include some water in the tax credit reform glass. We said that in 2010, and we can say it again in 2015.

It was a brief, shining moment for Iowa, and it came five years ago today.

A special Tax Credit Review Panel appointed by then-Governor Chet Culver, after an in-depth examination of all Iowa tax-credit programs, offered a 10-page review with some tough recommendations.

As the Iowa Fiscal Partnership* stated the day of the report’s release, Jan. 8, 2010, the panel “took an important step to make Iowa business subsidies more accountable and transparent.”

Major recommendations of the Tax Credit Review Panel were to:

•   Provide a five-year sunset on all tax credits;
•   Eliminate the refundability of the Research Activities Credit for large companies;
•   Eliminate the film tax credit;
•   Eliminate of the transferability of other credits;
•   Place all business credits under a $185 million cap;
•   Reduce the rate for the School Tuition Organization (STO) Tax Credit and lower the cap; and
•   Impose an income test for the Tuition and Textbook Tax Credit.

Action in the Legislature, unfortunately, fell well short of those bold proposals, as we noted in a report that spring. In their biggest moves, lawmakers set up a periodic review of tax credits but required no action to affirm the value of any credits, and they put light restrictions on some credits. Some of those limits already have been raised; the proposal to restrict the STO subsidy for private school tuition not only was ignored but the credit has been expanded.

In short, five years later, Iowa is as lax as ever in its treatment of these subsidies. Under the sunset clause recommended back then, we would in 2015 be preparing for a round of debate and action to keep, expand, limit or eliminate certain tax credits. Instead, we have no expectation of any debate, let alone any action. If the credits are working, we don’t know because beneficiaries are not forced to show it.

It is not too late for Iowa lawmakers to address these issues and include some water in the tax credit reform glass. We said that in 2010, and we can say it again in 2015.

The seven members of the Tax Credit Review Panel, by the way, were Richard Oshlo, then interim director of the Department of Management; Fred Hubbell, interim director of the Department of Economic Development; Rob Berntsen, chair of the Iowa Utilities Board; Bret Mills, executive director of the Iowa Finance Authority; Cyndi Pederson, director of the Iowa Department of Cultural Affairs; Mark Schuling, director of the Iowa Department of Revenue; and Jeff Ward, executive director of the Iowa Agricultural Development Authority.

Their work was good and important, and with hundreds of millions of dollars at stake, we should not forget it.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

*The Iowa Fiscal Partnership is a joint public policy analysis initiative of two nonpartisan, nonprofit Iowa-based organizations, the Iowa Policy Project in Iowa City, and the Child & Family Policy Center in Des Moines.

Author: iowapolicypoints

The Iowa Policy Project is a nonprofit, nonpartisan organization that provides research and analysis to engage Iowans in state policy decisions. We focus on tax and busget issues, the Iowa economy, and energy and environmental policy. By providing a foundation of fact-based, objective research and engaging the public in an informed discussion of policy alternatives, IPP advances effective, accountable and fair government.

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