As more shocking details continue to surface regarding Iowa’s rampantly abused film tax credit, lawmakers have begun giving increasingly serious attention to the issue of how to better oversee all the special subsidies contained within the state’s tax code.
A recent review of the credit by a team of accountants revealed a plethora of abuses, including incomplete records, altered contracts, unqualified expenditures, illegitimate labor expenses, deferred payments, advertising irregularities, nonproduction expenses, nepotism, inaccurate credit calculation, erroneous awards, broker fees, and pass-through business abuses.
This list of abuses has caused Governor Chet Culver to wisely call for a comprehensive review of all Iowa tax credits. While such a review is unlikely to turn up any abuses of the magnitude that took place under the film tax credit, it could potentially highlight credits that aren’t living up to the promises that were made when they were enacted.
By reviewing the effectiveness of these subsidy programs buried within the state’s tax code, Iowa could shine a bright light on an area of policy that typically receives much less scrutiny than direct spending programs, which must battle their way through the authorization and appropriations processes. In fact, Iowa would benefit greatly from conducting reviews of its tax subsidies on a regular basis, rather than waiting for another political scandal to erupt. Moreover, the state should consider expanding those reviews to include special deductions, exemptions, exclusions, deferrals, and preferential tax rates as well. Tax credits aren’t the only means by which the state provides subsidies through its tax code.
In addition to Culver’s call for tax credit reviews, other lawmakers have begun asking for greater tax credit disclosure. Rep. Clel Baudler, for instance, recently insisted that Iowa’s Department of Economic Development should “absolutely not” be able to “hide the specifics on the awards or grants they’re giving out.” We certainly agree.
The issue of subsidy disclosure is one that Good Jobs First has been leading the charge on for years. In addition, they’ve also recently posted an excellent piece on the history and effectiveness of film tax credits that’s worth a close look.