Meeting Public Comments

Mike Owen [Common Good Iowa]

Common Good Iowa welcomes reform of Iowas business taxcredit programs and we see good features in this bill. However, we are registered as undecided because the bill could be improved in ways we and others have pointed out through the years, particularly with regard to the Research Activities Tax Credit (renamed the Research & Development Credit in this bill). As this bill is evaluated, we encourage you to keep in mind critical tests of the value of any business tax credit: (1) that there is a clear public purpose for a taxpayer investment in a privatesector project; (2) that the desired activity would not proceed without the taxpayer investment; and (3) that there is public transparency and accountability for the use of tax dollars. The refundable research credit program was designed to boost small startup operations entrepreneurs an economic development focus in the 1980s. Unfortunately, it became a virtually unparalleled, multimilliondollar subsidy program for large companies that do not need state taxpayers help. It was an automatic credit, contributing to its lack of accountability to Iowa taxpayers who were told the state didnt have enough to fund adequate Supplemental State Aid to schools at the same time the state was giving away the equivalent of 1 or 2 percent SSA to companies to do research they could do on their own.This bill improves the program by capping the credit at $40 million a year, and making it an awarded credit, rather than an automatic one. Currently it is uncapped, and is projected to cost over $60 million in three of the five years from FY 202529. So there could be savings if we can be sure there is not a move of some of the current uses to other taxcredit programs being created in the bill, such as the Business Incentives for Growth (BIG) program.At the same time, the legislation does not assure big companies will not receive this subsidy. It also does not assure the way the current credit does that the subsidy will be limited to new research, as opposed to an ongoing subsidy. That should be a criterion required of IEDA in making awards.It is good to see clawback provisions in the bill, notably in the BIG program.As with any major tax proposal, this legislation should have a fiscal note at the subcommittee level to enable a better look at the impacts both in terms of policy and finance. Finally, it should be noted that in 2010, at the direction of the Legislature, the state Department of Revenue started annual reports to provide key information about the RAC. These reports should continue, with an added feature in the report to disclose not just the recipients and the amount of credits but also the amount of the credit paid as refunds, the purpose of the project, number of jobs supported and wages paid all as public information. The bill would make all of that except the names and totals confidential. As investors, Iowa taxpayers deserve to know that much about how their tax dollars are being used. This kind of information often is provided in other subsidies, and is provided by local governments about its spending; a state tax credit to advance a policy priority is no different. Thank you for this opportunity to comment on the bill.Mike Owen, Deputy Director, Common Good Iowa