The Iowa Fiscal Partnership (IFP) is again urging lawmakers to consider placing a cap on tax credits offered to businesses. The I-F-P is a tax and budget policy analysis initiative between the Child and Family Policy Center in Des Moines and the Iowa Policy Project in Mount Vernon and Iowa City.
Victor Elias, with the Child and Family Policy Center, says any budget cutting should focus first on the Research Activities Credit, which offers a company cash once its tax liabilities are met. "This has gotten totally out of hand," Elias says of Iowa R-A-C. "In 2005, the state wrote about 30-million dollars in checks to ten corporations that don’t pay any Iowa corporate income tax because that was the refundable amount of their research activities credits."
In addition, Elias says there’s no requirement in Iowa for public disclosure of business tax expenditures. "Those top ten companies that are getting checks…we don’t know who they are, we don’t know how much each company gets, we don’t know what kind of research they’re doing," Elias said. "We are just spending money, in essence, buying a pig-in-a-poke. We don’t know what we’re getting for the money we’re spending, other some kind of research, but we don’t know who we’re funding and to what degree."
In addition to drafting "transparency" legislation regarding business tax expenditures, the I-F-P is calling for a cap of $250,000 that corporations could receive annually under the R-A-C. Elias says the limitation would affect only a handful of corporations but would save the state over $30-million a year.
David Osterberg, executive director of the Iowa Policy Project, says the R-A-C has been addressed in several of the partnership’s reports over the years. "Why would anybody think this is fair? That is what I for one think, we have not come to grips with," Osterberg said. "We’re giving away secret checks to a small number of companies at the same time we’re cutting budgets significantly. I think this has to stop."
Governor Culver has proposed eliminating the authority of the Iowa Department of Economic Development to double the size of the Research Activities Credit when used with other incentives. Osterberg calls that "a start," but says legislators should take it a step further.
The complete I-F-P report is available online here .