Based On Yearly Return of Each Tax Incentive, Effective Determinations Should Be Made On Continuation, Cap, And Sunset Of Each Program To Ensure Iowa Taxpayer Money Is Spent Wisely
Earlier this week, the Department of Revenue released a new report on Iowa's Research Activities Tax Credit Program, showing the state gave out $46 million in tax credit refund checks for this single program in 2017. That's a five percent increase from the previous year. Like many other tax credits, the Research Activities Tax Credit program has no overall cap or sunset, and is expected to increase from $60 million in claims in 2016 to $76 million by 2018.
It's one example of a larger problem with Iowa's tax code: ballooning tax credits, exemptions, and deductions. The total value of Iowa's tax credits has grown by 180 percent since 2005, from $153 million to an expected $427 million in 2018. In 2017 alone, the state awarded $208.8 million in tax credits -- some of which were not only refundable but shockingly transferable, meaning recipients could sell them on the secondary market for cash. That same year, Governor Reynolds racked up $144 million in debt and slashed funding for education, healthcare, and infrastructure, to cover her misguided priorities and fiscal mismanagement. Now, as Reynolds calls for a "bipartisan task force to study all tax credit programs," Fred Hubbell issued the following statement.
"Led by Governor Reynolds' wrong priorities at the top, our tax system is chock-full of uncapped, wasteful corporate tax credits and giveaways while we underfund services Iowans need," said Fred Hubbell. "Our tax system and budget are out of control and desperately need to be reigned in. Back in 2010, I was part of a tax credit review panel that made recommendations which, if implemented, would have saved the state $160 million annually. That's money that should have gone to education, health care, and improving infrastructure across the state. Instead, it went to corporations that didn't need it."
Fred was appointed interim head of the Iowa Department of Economic Development (IDED) amidst the film tax credit scandal to provide "proper oversight." While serving as director of IDED, Fred served on a panel of state officials charged with a comprehensive review of state tax credit incentives. As part of their report, the panel recommended a series of cuts and changes to ineffective or improper tax credit programs that if implemented would have saved the state $160 million on an annualized basis.
"I urge Governor Reynolds to take a look at that report instead of continuing to mismanage taxpayer money," added Hubbell. "The recommendations have been made and ignored. I call for an immediate fiscal impact ratio analysis and caps and sunsets on every tax credit, deduction, and exemption in our tax code. It's poor fiscal policy that is crippling our state budget. It's time to restore responsible fiscal leadership so that we can put Iowa's budget behind the right priorities: investing in our people, not special interests."
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