A new report shows the State of Iowa issued nearly $44 million worth of tax refunds last year to corporations claiming a tax credit for research activities.
Senate Majority Leader Jack Whitver says that’s part of the discussion as Senate Republicans press to cut the corporate income tax rate, while at the same time reduce tax credits commonly used by businesses.
“If you’re going to dish out all these tax credits and exemptions, you can’t get your rate low enough,” Whitver told reporters Thursday. “We really want to balance that, so that we’re more competitive.”
Corporations claim the research activities credit to reduce what they owe in state taxes and the credit is so lucrative, many corporations erase all of what they owe and then some, so they get a refund check from the State. Whitver said the credit has supported companies with high-paying jobs in research. “But do we need the most generous credit in the entire company?” Whitver asked. “And do we need to be cutting out $44 million worth of checks to companies here in Iowa?”
House Republicans approved their tax plan this week and it does not include a corporate tax reduction. House Speaker Pat Grassley isn’t closing the door on a corporate tax cut, however.
“Our focus was on the individual income tax. That is why we moved that bill as quickly as we did,” Grassley said. “…That doesn’t mean there won’t be continued conversations between the House, the Senate and the governor.”
Senator Whitver said there’s already agreement on about 75% of what should be in the final tax plan, with the exception of the taxes corporations pay.
“In mid-February I’m not going to draw any lines on anything,” Whitver said, “but I think it’s pretty obvious around the building that there’s a lot of interest in starting the conversation on corporate reforms. I mean, we have the second or third highest rate in the country.”
Governor Reynolds has proposed lowering the corporate income tax rate to 5.5%. The Senate GOP plan doesn’t go as far, but would cut that rate to just under 8% and get rid of about $140 million worth of business tax breaks, including a tax credit for the purchase of computers.