Reynolds’ Budget-Busting Corporate Give-Aways Are Out Of Control

Republicans are fond of calling Democrats “big spenders” but it’s Iowa Republicans that aren’t capable of balancing the state’s budget this year. Republicans control all three branches of state government, so they can’t blame Democrats for their budget-busting corporate give-away spending.

The GOP preaches about taking responsibility and holding people accountable. Then why is Governor Reynolds refusing to take responsibility while blaming others for the state budget catastrophe? Reynolds’ party exploded the state budget with reckless corporate give-aways, but is blaming farmers for her fiscal mismanagement. Why isn’t Reynolds holding her State Department of Revenue accountable for a huge error in estimating the cost of these massive corporate gifts? Lastly, why is Governor Reynolds refusing to address the root causes of the Republican budget mess? Without action the 2018 budget is likely to mirror the 2017 budget disaster.

For the third time this year, Iowa Republicans have failed to balance Iowa’s checkbook on time. Just a few weeks ago Governor Reynolds and her corporate give-away team realized they didn’t have enough revenue to cover the bills coming due last Friday, June 30^th. Due to their failed management, Reynolds made a final end run by plundering the states emergency funds for the second time this year.

The first time they overdrew the checkbook, the Branstad-Reynolds regime chose to cut crucial programs, education funding and state services by $118 million. The second time, in March, the states’ checks were about to bounce again so they raided the states’ reserve funds for another $131 million.  Finally, with barely one month left in the fiscal year Governor Reynolds made a second raid of $50 million on the states’ emergency funds in order to end the fiscal year in the black.

One might assume that since Iowa Republicans literally control all the levers of power in state government, they wouldn’t blame anyone but themselves for the cratering of Iowa’s budget. However, the current Republican operating philosophy doesn’t allow facts to get in the way of their blame game.  This time Governor Reynolds chose to blame Iowa farmers for her corporate gift-giving team’s failure to balance the Iowa checkbook.

“Tax revenues coming into the state are less than expected. The farm economy is partly to blame,” Reynolds said.

Farm income has slowed but that’s just a small piece of the revenue pie. The Iowa economy is growing and tax revenues are increasing at 1.3%. Iowa unemployment is at record low levels thanks to the momentum generated over the last eight years by the Obama recovery. This is a boom in Iowa’s economy, yet Republicans have had to cut the budget three times within one year. That’s clearly an indication of the Branstad-Reynolds fiscal mismanagement.

While Reynolds blames famers for declining revenues she totally ignores the massive lost revenue due to all the Republican corporate giveaways. The 2016 expansion of the manufacturer’s sales and use tax exemption was estimated to cost $17 million in 2017. When they closed the books last Friday, it appears that it will exceed $100 million

Why isn’t Reynolds investigating how and why her Department of Revenue’s sales tax loss was six times larger than their estimate? There have been rumors coming from state government that manufacturers are simply claiming tax credits and that the Department isn’t auditing them properly.

One thing is known about the tax credits, manufacturers are confused about what items are subject to the tax credits. The Iowa Department of Revenue has multiple pages of complicated instructions attempting to describe who and what qualifies for the tax exception. Are Iowa manufacturers simply taking credits without understanding whether they qualify?

The Republicans’ manufacturer’s sales tax exception is just the latest corporate give-away done without thorough analysis. Another large tax break, the Research Activities Credit is draining millions in revenues by giving credits to some of Iowa’s’ largest corporations. Many of these large profitable corporations pay no taxes and end up getting checks from the Iowa taxpayer. In addition, Branstad’s $400 million corporate property tax breaks in 2013 will drain tax revenues well into the future.

The Iowa Policy Project estimates that business tax credits will increase by 50% between 2011 and 2021. This Republican diversion of revenue from public to private pockets is out of control.

Former Governor Culver’s Special Tax Credit Review Panel recommended in 2010 that all these business tax credits should sunset within five years. Had Iowa followed that plan, Iowa might have avoided these huge budget shortfalls. Republicans did begin that conversation again in the last year’s legislative session but failed to act.

Governor Reynolds’ corporate welfare is wrecking Iowa’s budget by redistributing taxes from Iowans to out of state businesses. Her regime is giving taxpayer funded checks to profitable corporations that pay few taxes. In partnership with Branstad, Reynolds’ Department of Economic Development has rewarded foreign companies with giant tax breaks to bring an incredibly small numbers of jobs.

Why should Iowa taxpayers continue to subsidize profitable companies rather than supporting Iowa education and basic government services? Reynolds must answer for her budget mismanagement and disastrous corporate welfare priorities.

by Rick Smith
Posted 7/3/17