CEDAR RAPIDS, Iowa — Iowa’s $420 million tax-credit programs are an integral part of economic development efforts, but they come at a price that can be measured in the loss of public services.
Those were the views of speakers talking Tuesday to a panel advising Gov. Chet Culver on the state’s use of tax credits.
Dubuque Mayor Roy Buol called state tax credits a “critical tool” in the community landing an IBM service center that is projected to employ 1,300 people with an annual payroll of nearly $60 million.
Dubuque is the poster child for the state historic tax credits, Buol said during the public hearing in Cedar Rapids. He said $47 million in historic tax credit have leveraged $188 million in investment.
Craig Wood of the Linn County Mental Health Department is more worried about the state’s funding of human services.
He recalled Culver’s outrage at the treatment of the mentally retarded men employed by a turkey processing plant who were found living in an Atalissa bunkhouse with no working heating system and boarded up windows. They were relocated to appropriate facilities in Waterloo, he said.
“Now the state is poised to kick those men out of services along with thousands like them” because of the state can’t fund human services, Wood said. “It doesn’t make sense to me to have tax credits to promote job development while laying off people in the public service sector.”
Culver ordered a review of the state’s 32 tax credit programs after revelations that some of the state film tax credits were used to purchase luxury vehicles and other potential abuses. The panel, which will hold another hearing today in Urbandale, will make recommendations to Culver by Jan. 1 addressing oversight, accountability, transparency, public reporting, cost-benefit and which of the credits should be continued, curtailed and or eliminated.
The problem, according to Amy Logsdon, political director of the Iowa Citizen Action Network, is that from 2006-11 state revenues have remained basically flat while tax credits have increased from $144 million to $497 million.
“Iowa just can’t afford to pay companies this much and still pay for our children’s education, roads and other crucial programs,” she said.
But Iowa can’t turn its back on economic development if it wants to generate revenue for those human services, representatives of various industries told the panel.
Roman Terrill of Integrated DNA Technologies, representing the Iowa Biotechnology Association, said the chief justification for tax credits, especially the Research Activities Tax Credit, which aids research and development efforts, is that 70 percent of the $45.5 million paid out in 2009 goes to pay for well-educated, high-salaried researchers who conduct research in Iowa rather than elsewhere.
The tax credit is a determining factor in making decisions about when and where to conduct research, said Terrill, who reminded the panel that Integrated DNA recently decided to add 50 jobs in Oakdale rather than at one of its other locations.
The research tax credit was the most contentious topic of the day in part because in fiscal 2009, the state “refunded” nearly $42 million to companies claiming the credit that did not owe any income tax. The names of those companies and the amount they received were not made public.
Publication of those refunds would be “bothersome” to Iowa industries, Steve Evans of the Iowa Taxpayers Association said.
“It may look like just a name and an amount,” he said, but making public the names of research and development tax credit recipients and the amount of the credit is “the foot in the door, the camel’s nose under the tent. It is an issue.”