Tags: IA | XGR | Iowa | Tax | Credits

Report: Overhaul Doesn't Reduce Tax Credits Enough

Wednesday, 17 Mar 2010 03:01 PM

 

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Lawmakers' efforts to overhaul the state's complex system of tax credits falls short of the money-saving goals set by Gov. Chet Culver, according to a new report from a liberal think tank.

Culver's budget assumes a savings of $52.5 million in the first year that tax credits for businesses are reduced, said Peter Fisher, a researcher for the Iowa Policy Project. He said that's unlikely.

"I think it's close to doing little, nothing, certainly in the next fiscal year," Fisher said.

Many of the proposed tax credit changes won't go into effect until July 1, Fisher said, and beneficiaries will likely file for credits before then.

That means credits approved before July 1 will remain on the books until June 31, 2011.

For instance, lawmakers are considering suspending the state's film tax credit for two years after two filmmakers and the former manager of the Iowa Film Office were criminally charged with mishandling the tax breaks. But if a filmmaker renews a credit by July 1, the suspension would only apply for one year, from July 1, 2011, to June 31, 2012.

Senate Majority Leader Michael Gronstal, D-Council Bluffs, said the proposed changes are the best lawmakers could come up with.

"This is the product of a group of people who have been working since the first week of the session," Gronstal said. "It embodies a lot of compromises. It is the art of what is possible."

The legislation also would create a special panel to review all the state's tax credits and determine whether they are accomplishing the goals for which they were created, Gronstal said.

Rep. Paul Shomshor, D-Council Bluffs, chair of the tax-writing House Ways and Means Committee, said tax credits are an important to restoring Iowa's economy.

"They help the economy, that's the goal," Shomshor said. "The first thing is, you have to have legislation you can pass."

Members of the Iowa Policy Project said the package's effectiveness has been neutralized after lobbying from businesses.

"That package of bills that is in the Housed and the Senate is really, on balance, probably the best the business lobby could hope for," said Victor Elias, also with the Policy Project.

Nearly every state program has been sharply cut back because the recession dried up state tax collections, but lawmakers still refuse to significantly reduce tax credits for businesses, Elias said.

A spokesman for the Iowa Association of Business and Industry did not immediately return messages left for comment Wednesday afternoon.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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