A new report from the non-partisan Iowa Policy Project claims a state program that provides millions of dollars in tax breaks to businesses does little to actually encourage new business investment in the state. University of Iowa history professor Colin Gordon wrote the report about the Enterprise Zone Program, which he calls a “fiscal disaster in need of major reform.”
The program is designed to stimulate development in economically depressed areas, but Gordon says the criteria for what qualifies as an “economically depressed area” is too broad. “So now, virtually half of the state qualifies in one way or another as a distressed area,” Gordon said. According to Gordon, counties can qualify for the program by using census data from either 1990 or 2000. He says it would not be difficult to use more current data and identify areas that are truly deserving of the assistance.
“There’s absolutely no reason why you can’t have a moving target and tweak those criteria, but do it in the current year,” Gordon said. Advocates of the Enterprise Zone Program say it encourages businesses to move to Iowa or stay in Iowa. But, Gordon says there’s no hard evidence the program has attracted any firms. In addition, he says claims of “jobs created” from the program vary by a wide margin.
“There are cases where firms are getting a relatively modest credit and creating hundreds of jobs at not much cost to the state. Then, we found cases where firms are getting massive credits and creating maybe 8 or 10 jobs,” Gordon said. Gordon projects the state could save over $60 million a year by capping subsidies on a cost-per-job basis. According to state figures, since 2001, Iowa has dished out more $350 million in tax refunds or breaks to businesses under the Enterprise Zone Program.
