Democratic candidate for governor Fred Hubbell says it’s time to evaluate every state tax break and get rid of the ones that aren’t “producing value” for the state.
“Every credit, exemption, deduction should have some sort of cap on it, so it can’t keep growing in an uncontrolled manner. For example, the research activities tax credit, when I was at Economic Development, the state was writing $25 million of those checks,” Hubbell says. “Well, now it’s over $40 million a year.”
Hubbell, a retired businessman, served as interim director of the Iowa Department of Economic Development in 2010. Hubbell says over time, the research activities tax credit primarily has “morphed” into a benefit for corporations that don’t pay state income taxes, so they get a check from the State of Iowa.
“The original intention of that tax credit for was small businesses who couldn’t afford to hire phD folks to do research for them because they weren’t making any money, so the idea was to help them hire these high-priced talent, let’s give them a tax credit that’s refundable so they could use the refundability — the check, if you will — to have some cash to actually pay those researchers,” Hubbell says.
Hubbell says the state’s research activities credit should be made into a tax deduction. A recent report indicated there’s been a 180 percent increase in the value of state tax credits over the past 22 years. Hubbell says it’s time to at least limit or even do away with many of those “give-aways.”
“We could be using that money, instead, to focus on the priorities that the state really needs to put the money behind, which is actually funding education, making college affordable,” Hubbell says.
Hubbell was part of a tax credit review panel in 2010. Hubbell says if Governor Terry Branstad had implemented the panel’s recommendations when he and Lieutenant Governor Kim Reynolds took office in 2011, the state would have been “saving” $160 million a year.