Iowa is missing an opportunity to implement strong transparency measures and to recapture revenue that it has been allowing to slip away for years.
Legislation passed by the Senate and now before the House appears to make only small, cosmetic changes to a serious structural problem. Generous tax credits have been leaking revenue out of the state for many years. Considering the recent scandal in the film tax credit program and the fact that Iowa, like most other states, faces revenue shortfalls of historic proportions, the state very much needs meaningful reform.
The Governor’s Tax Credit Review Panel made promising recommendations, and the Governor supported those recommendations when he issued a call for action in his Condition of the State address. Yet, the legislative package falls far short of the panel’s recommendations. For example:
It is important to note that lowering a cap is not the same thing as “saving” money. When the sum of all business credit claims is not reaching that cap, then the state is only reducing its potential liability and not saving any actual dollars.
The proposal is also lacking in essential new transparency measures. No additional disclosures regarding tax credits and expenditures are proposed in the plan. Iowans should know who is getting their tax dollars.
And this bill is certainly not good news for the thousands of Iowans who are seeing important safety net programs and jobs disappear during this recession.
Does this bill do something? Yes. Does it do much? No. Nothing in this bill is objectionable when considering the principles of sound tax policy. That said, much more needs to be done to move Iowa forward and to solve Iowa’s budget problems using an approach that is truly balanced.
Posted by Christine Ralston, Research Associate