Business groups told a panel of the governor’s top aides that the state’s premiere business tax credits should remain intact, while critics called for greater scrutiny and an end to some of the tax breaks.
The second of two public hearings about state tax credits was held Wednesday afternoon and it lasted more than four and a half hours. Jan Laue of the Iowa Federation of Labor told the panel of state agency managers that it’s time to ensure all state tax credits provide a good return on the investment.
“It’s really too bad that it’s taken a budget crisis and a scandal in Economic Development to precipitate a review of tax credits in Iowa,” Laue said. “But it’s something that has been needed for a very long time.”
Charlie Bruner of the Iowa Child and Family Policy Center said there should be greater accountability and a systematic review of each tax credit awarded to businesses.
“Iowa’s budget has become unsustainable because of the dramatic increase in tax breaks, expenditures and credits and the inclusion of loopholes within the Iowa tax code,” Bruner said. “Since 1990, scores of tax credits and tax expenditures have been added to the tax code that now costs the state $1 billion in state revenue annually.”
Dave Roederer of the Iowa Chamber Alliance said cutting or getting rid of the state’s major tax credits for businesses is a bad idea.
“With all due respect, many states right now are…discussing how to grow their economy, how they’re going to get business and industry that they currently have back on their feet, becoming more profitable, so that they can start hiring people back,” Roederer said. “…So for us to be having hearings as to should we be, maybe, taking away some of our incentives I don’t think is a great message.”
Jason White of the Professional Developers of Iowa said the state’s main core of business tax credits is a “safe and solid” return on investment.
“Financial assistance is something that we would all prefer not to do in this business,” White said, “but they are required for any deal.”
Iowa Association of Business and Industry president Mike Ralston said Iowa businesses expect state tax credits to be “scrutinized” regularly, but businesses oppose revealing how much an individual company gets in state tax credits.
“This is a very competitive business climate,” Ralston said. “The fact that a company spends ‘x’ amount of money on research is something their competitors would like to know.”
Representatives of the state’s major business groups, however, stopped short of saying the state’s hefty tax credits for the film industry should continue, saying instead that they didn’t have enough knowledge of the industry to comment. Even Tammy Shutters of the Iowa Motion Picture Association conceded during her testimony that the tax credits for film and TV productions need “greater oversight” and the state should be “more picky” about which film and TV productions qualify for tax credits.
“We believe the program needs to be fixed, not nixed,” Shutter said. “IMPA believes that the program provides a positive economic impact to our state and the reasons for creating the program are still as relevant today as they were in 2007.”
Some critics question why the state is awarding huge tax subsidies to create temporary jobs that end once a movie wraps.
“I think that it is important as a state to remember…that our businesses need to be diversified. I think that in the beginning that the tax incentive is comparable with other states, or maybe going forward it needs to be comparable to other states,” Shutters said. “As our infrastructure is built, as our crew is trained up and we have greater crew, that tax credit can be reduced.”
Shutters used a power-point presentation to highlight her testimony, prompting acting Department of Economic Development director Fred Hubble to joke with Shutters: “I hope this was locally made.”