Democrats in the Iowa Senate have endorsed a bill which limits the amount of tax credits businesses may claim for research and development.
Senator Pam Jochum, a Democrat from Dubuque, says limiting that research and development tax credit and three others to 175-million per year will help legislators better manage the budget.
"It will help provide some stability to our budgeting process and also provide some fiscal discipline," Jochum says. "We are going to be applying the same scrutiny to state spending in the tax code as we currently do in our appropriations process."
Business groups objected and all 18 Republican Senators voted against the bill. Senator Brad Zaun, a Republican from Urbandale, voiced his opposition during this afternoon’s senate debate.
"We are the only state in the country that’s looking at reducing tax credits," Zaun said. "This is a time when we should not even be having this conversation."
The bill would limit tax credits beginning farmers, for film and TV production companies and for companies that make workplace improvements for the disabled as well as for companies which engage in research and development and claim a tax credit. According to Zaun, that R-and-D tax credit is crucial to some of Iowa’s largest employers.
"The John Deeres, the Pellas, the Rockwell-Collins, the Vermeers — those are the companies that, by the way I’ll remind you, are paying the property taxes and those are the companies that could potentially be effected by this bill," Zaun said. "…This bill is potentially a job-killer, not a job creator."
Jochum says by limiting the tax credits, legislators will be able to better track whether, for example, the R-and-D tax credit is prompting companies to engage in more research.
"Fiscal prudence, fiscal discipline, accountability for the taxpayer because they are the investors in these programs and they have a right to know whether or not these programs are working," Jochum says.
The bill passed on a party-line vote with 32 Democrats in favor and 18 Republicans opposed. It now goes to the House for consideration.