Speakers question Iowa tax credits at hearing

AP News
Posted: Dec 15, 2009 5:27 PM

A day after the state released a 121-page report examining Iowa's system of tax breaks for businesses, some speakers at a public hearing Tuesday lauded the credits for helping draw jobs to the state while others called for greater accountability.

The Iowa Department of Management issued the report on 36 tax credits Monday, about three months after allegations surfaced that a program aimed at attracting moviemakers to Iowa was misused and poorly tracked. About 200 people attended the Cedar Rapids hearing before directors of the state agencies that oversee the tax credits.

Those officials will hold another meeting Wednesday in Urbandale and then send a recommendation to Gov. Chet Culver.

On Tuesday, representatives of businesses and organizations that recruit them said the tax credits are effective at drawing companies to Iowa and that businesses would leave the state without them.

"If we want to add high-quality jobs to Iowa, we have to understand we're in competition with 49 other states and the rest of the world," said Mike Blouin, president of the Greater Dubuque Development Corporation. "If you're having trouble quantifying (the impact of tax credits), then develop a formula to do so. I think you'll find it's been very successful."

Dubuque Mayor Roy Buol said tax credits were a key to his city's success in beating out six other communities and drawing an IBM service center and 1,300 jobs to Dubuque.

"State tax credits are a critical tool," Buol said. "We would not be the community we are without them. They need to remain an incentive that developers can utilize."

Others, however, noted the big increase in dollars devoted to the tax credits in recent years.

Peter Fisher, research director at the liberal-leaning Iowa Policy Project, said $144 million was spent on tax credits in 2005, a figure that has climbed to more than $400 million in the current fiscal year. He said the state needs to distinguish between what her terms good and bad credits.

"A good credit provides just what (a business) needs," Fisher said. "A bad credit provides more than needed, or an open-ended commitment of state funds to a business that would never stand up on it own."

Steve Evans, a board member for the business group Iowa Taxpayers Association, argued that giving up the tax credit would amount to "unilateral disarmament" when competing with other states.

"Our arsenal of tax benefits is limited," Evans said. "Iowa, in a comparative situation against other states, has very few arrows in its quiver."

Asked by members of the panel whether companies that receive the tax credits should be required to disclose some information about the amount of money they had received, Evans said businesses would be uneasy about anything they thought would put them at a competitive disadvantage.

"That's a very sensitive question for members of our association," Evans said. "Is it the foot in the door or the camel's nose in the tent? I don't know. It is an issue."

Culver called for the study of Iowa's tax credits in November after allegations of improper spending and sloppy bookkeeping by the Iowa Film Office, which handled tax breaks intended to draw moviemakers to the state.

Culver fired the film office manager, Thomas Wheeler. Department of Economic Development director Michael Tramontina and a deputy director abruptly resigned.

The governor suspended the film program in September. After a court ruling that sided with a moviemaker, Culver reinstated the program for those who already had sought credits before the suspension.