Iowa Senate Majority Leader Mike Gronstal discussed the film tax credit fiasco on this weekend's Iowa Press program, and it sounds like defenders of the tax credit will be fighting an uphill battle during next year's legislative session:
"I think we're going to get this investigation from the Attorney General and from the State Auditor. I think we're going to do a good evaluation of the program and if we can't show a real benefit to the state of Iowa - and not just a few part-time jobs, but a real long-term benefit to the state of Iowa - I think it's 50-50 as to whether this program continues."
According to Gronstal, he and other legislators right now "see very little in terms of potential benefits" to the state from the film tax credits which have been awarded already. [...]
Gronstal says he may regret having voted to create the program and he expects some political fall-out from this episode.
"People will be disappointed in that, but I think it's the responsibility of the legislature - we try things in economic development. Everything we try doesn't work and it's perfectly o.k. to occasionally decide, 'You know, we've (gone) down a road and that road doesn't make as much as sense as we thought it made,'" Gronstal says. "And so we're going to go back and change that."
Gronstal also defended Governor Chet Culver, saying "once he found out about [problems with the film tax credit] he acted quickly and put the program on hold and got people to investigate."
Gronstal expressed surprise that a flood of applications for film tax credits this spring allowed producers to get around the $50 million annual cap the legislature approved for the program. (Note to legislators: next time you cap a tax credit, make the law go into effect immediately on being signed by the governor.)
Culver has ordered a comprehensive review of all Iowa tax credits, and Gronstal made clear that legislators will subject these programs to additional scrutiny in the coming year:
"If you can show that a tax credit creates a climate, for instance, the research activities tax credit - if you can show that that keeps an industry here in the state of Iowa and builds long-term jobs and high-wage, high-skills jobs in this state where there's a net benefit to the state by having that set of jobs come along with it, yeah, that makes sense," Gronstal says. But Gronstal says if you can't show that, then the tax credit should be repealed.
A critical analysis of Iowa's tax credits is overdue, but better late than never. State revenues continue to lag behind projections because of the recession. Repealing wasteful tax credits could reduce the size of state spending cuts during the 2010 fiscal year. Iowa Republicans would like to plug the budget gap entirely through spending cuts, but they forget that deep spending reductions by state and local governments can also be a drag on the economy.