When a state government hands out cash to businesses, you'd think that the state's taxpayers would at least have a right to know who exactly they're subsidizing. This is especially true in Iowa, a state that offers businesses a research tax credit that is refundable -- meaning businesses actually get checks from the state when their credits exceed their tax liability. In 2006 alone, those checks cost the state nearly $44 million, with about 85% of that going to just 10 companies.
Last week, Iowa policymakers decided that their constituents might at least want to know where those millions are going. Governor Chet Culver signed a bill requiring that any business receiving a research credit check from the state of more than a half million dollars have its name made public.
Iowa is unusual in its generosity to businesses conducting (or claiming to conduct) research. Of the 38 states offering a research credit, only five actually pay businesses for conducting research even if their tax credit exceeds the amount of taxes they paid.
Despite the unusual generosity of the Iowa credit, one business industry representative had the gall to suggest that businesses may decide to conduct their research elsewhere as a result of the measure. The phrase "crying wolf" comes to mind.
But ultimately, the new Iowa law is little more than a baby step. It's hard to believe that Iowans are not also interested in knowing which businesses receive $100,000 or $200,000, for example, from the state for conducting research. Furthermore, even businesses not receiving refunds, but nonetheless benefiting from the research credit, are effectively being subsidized by the state and should be identified as well. And limiting the disclosure provision to only the research credit is also disappointing.
If Iowa really wants to improve government transparency, it should consider reporting on the jobs and other benefits created as a result of this and other subsidies -- as opposed to just offering the company's name. See this report from Good Jobs First for more on appropriate state subsidy disclosure practices.