Researchers say 'loopholes' costing state $100 million
By Todd Dorman, Journal Des Moines Bureau | Posted: Tuesday, January 27, 2004
DES MOINES -- Tax laws and "loopholes" benefiting large corporations and other interests are costing state government nearly $100 million annually, researchers with an Iowa think tank argued Monday at the Statehouse.
Among its recommendations, the Iowa Policy Project is embracing a plan pushed by Gov. Tom Vilsack to close a loophole he contends is allowing multi-state companies to duck state taxes. Such a move would boost revenues by $25 million to $40 million annually, according to the policy project's analysis.
Republican legislative leaders discounted what they called the "liberal" group and its findings. They argued what some see as a loophole is actually a tax break that makes Iowa more attractive to businesses.
"If the goal is to make a buck today and drive business out the next day, we haven't gained anything," said Senate Majority Leader Stewart Iverson, R-Dows.
Vilsack wants to stop companies from setting up what he contends are shell subsidiaries that serve as a haven for profits that would otherwise be subject to state corporate income taxes. The governor would use the money saved by closing the loophole to help fully fund local property tax credits.
"Tax laws sometimes get developed out of the public eye," said Charles Bruner, who heads the Iowa Child and Family Policy Center. The group is affiliated with the policy project. "Sometimes, (tax law) is crafted to benefit a few."
The policy project argues that national retail chains are the chief beneficiaries of current state law. But 14 states, including Minnesota, Illinois and Nebraska, have moved to stop the practice.
"It gives a competitive edge to multi-state retail businesses," said David Osterberg, a former Iowa lawmaker who heads the policy project. "It's a loophole that benefits a small number of corporations."
But Republicans argue changing the law could have broader implications for multi-state manufacturers and other non-retail businesses. At the very least, they worry that any move to collect more taxes from companies would hurt Iowa's efforts to lure new firms.
"We either have to project an open-for-business attitude about this state, or just tell folks if you're from out of the state of Iowa we aren't interested in having you here," said House Speaker Christopher Rants, R-Sioux City.
Among the policy project's other recommendations, it called on lawmakers to stop corporations from dodging some taxes on some out of state sales, accounting for $10 million to $15 million in lost taxes. It also argues that Iowa's decision to match a federal estate tax phase-out on large estates is siphoning away $18 million from state tax revenues.
The group argues that a special state capital gains tax break approved in the late 1980s for those selling a business now amounts to a $20 million to $35 million tax cut annually. A property tax credit for pollution control devices at large-scale hog facility adds up to $5 million in lost revenues, according to the policy project.
Among its recommendations, the Iowa Policy Project is embracing a plan pushed by Gov. Tom Vilsack to close a loophole he contends is allowing multi-state companies to duck state taxes. Such a move would boost revenues by $25 million to $40 million annually, according to the policy project's analysis.
Republican legislative leaders discounted what they called the "liberal" group and its findings. They argued what some see as a loophole is actually a tax break that makes Iowa more attractive to businesses.
"If the goal is to make a buck today and drive business out the next day, we haven't gained anything," said Senate Majority Leader Stewart Iverson, R-Dows.
Vilsack wants to stop companies from setting up what he contends are shell subsidiaries that serve as a haven for profits that would otherwise be subject to state corporate income taxes. The governor would use the money saved by closing the loophole to help fully fund local property tax credits.
"Tax laws sometimes get developed out of the public eye," said Charles Bruner, who heads the Iowa Child and Family Policy Center. The group is affiliated with the policy project. "Sometimes, (tax law) is crafted to benefit a few."
The policy project argues that national retail chains are the chief beneficiaries of current state law. But 14 states, including Minnesota, Illinois and Nebraska, have moved to stop the practice.
"It gives a competitive edge to multi-state retail businesses," said David Osterberg, a former Iowa lawmaker who heads the policy project. "It's a loophole that benefits a small number of corporations."
But Republicans argue changing the law could have broader implications for multi-state manufacturers and other non-retail businesses. At the very least, they worry that any move to collect more taxes from companies would hurt Iowa's efforts to lure new firms.
"We either have to project an open-for-business attitude about this state, or just tell folks if you're from out of the state of Iowa we aren't interested in having you here," said House Speaker Christopher Rants, R-Sioux City.
Among the policy project's other recommendations, it called on lawmakers to stop corporations from dodging some taxes on some out of state sales, accounting for $10 million to $15 million in lost taxes. It also argues that Iowa's decision to match a federal estate tax phase-out on large estates is siphoning away $18 million from state tax revenues.
The group argues that a special state capital gains tax break approved in the late 1980s for those selling a business now amounts to a $20 million to $35 million tax cut annually. A property tax credit for pollution control devices at large-scale hog facility adds up to $5 million in lost revenues, according to the policy project.
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