Keep Iowa Competitive
March 30, 2017 | Doug Neumann, Interim President & CEO, Cedar Rapids Metro Economic Alliance
State tax credits are important to economic development in Iowa's Creative Corridor. We can point to new jobs, capital investment and tax base growth that absolutely would not have happened without tax credit support in our current tax environment.
That last part is key: in our current tax environment. Iowa has the highest effective corporate income tax rate in the nation, and numerous legislative remedies, including tax credit programs, are used to reduce annual costs to businesses and make this region competitive with other areas. If we were to simplify our tax code and reduce those published rates, many tax credit programs might become unnecessary. And that's why a review of tax credit programs must be done in the context of review of the state's entire tax system.
House Study Bill 187 (HSB I87) caps the amount the state pays out in tax credits each year and ends the practice of issuing refunds when the value of the tax credit exceeds what taxes are owed. It does nothing to simplify the state's tax code or reduce the tax rates that economic developers are burdened with as we try to recruit and retain Iowa jobs.
In the last few years, the state issued tax credits to Creative Corridor companies such as Rockwell Collins, Red Star Yeast Company, Whirlpool, CRST, VSPEC, General Mills, Diamond V and Skyworks Solutions, just to name a few. Those companies provide thousands of quality jobs to Corridor residents at good wages, which ultimately generate a robust economy and builds strong communities.
For example, for every three cents Iowa forgoes in tax revenue to promote research and development, we get a dollar in private investment. Of that investment, nearly 60 percent goes to payroll that yields personal income tax and sales tax revenue to the state, local sales tax revenue and property taxes for schools and municipal services, and otherwise spurs significant economic activity.
Tax credits also supported renovation of the former Chrome Horse building in the NewBo District for commercial, office and retail space, and the former Monroe Elementary building which is being converted into low-income senior housing.
If Iowa does not provide incentives to companies, other states will. In fact, other states have worked to mirror Iowa's incentives and are courting our local employers to move.
The Cedar Rapids Metro Economic Alliance, along with other statewide business groups, has registered against HSB187 due to concerns with its arbitrary capping and reduction of tax credit funding and the elimination of refundability. We are not opposed to a review of tax credits, but it is imperative it be done as part of a comprehensive evaluation of our state's entire tax code.
Now is the time for economic developers and the business community to speak up on this and other tax and budget items important to our work. With tight budgets, many tough decisions will be made. Ask your legislators to not support HSB187 and encourage them to look at tax credits as an overall comprehensive study of the entire state tax code.