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State Tax Credits Increase Dramatically

September 20, 2018 8:30 am by: Category: 2018 Session Information, Featured, Recent News Leave a comment A+ / A-

In recent years, the total dollar amount of state tax credits to corporations has increased substantially and left the state with steep budget cuts and more debt.  During the same time, investment in critical state services, like public schools and health care, has been low.

Even as corporate tax credits increased dramatically, Republican lawmakers passed a tax bill in 2018 with nearly $500 million in new tax cuts for corporations while leaving public schools with less than $40 million in new funding next year.

According to a 2010 Iowa Department of Revenue study, the state has over 373 tax credits, exclusions, and tax exemptions that cost the state over $12 billion annually.

Many Iowans have raised concerns specifically about the state’s refundable tax credits.  These credits allow some of the biggest companies in the state to not only reduce their taxes to nothing for the year, but require the state to give millions in state dollars back to the companies.  In 2017, a handful of companies not only paid no state income tax, but received checks for nearly $42 million from the state.

In addition to these state tax expenditures, some companies get even more in local taxes.  Property taxes are generally collected and used by local governments, so any property tax exemptions or credits created by the state typically reduce local government revenues.  This reduces revenues used by local cities and counties to provide services like police and fire, repair streets, and provide community resources like parks and community centers.

In 2017, leaders in central Iowa decided to give $213 million in state and local incentives to the world’s most profitable company, Apple, to build a data center.  With just 50 permanent jobs created, the incentives means taxpayers are giving $4.26 million per job. That deal has led to many questions from Iowans about the approval process for projects like these and if there is any state oversight of these agreements.

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