Tax Credits Under Fire From All Sides

Date: May 02, 2017

Iowa tax reform could do away with the long challenged Research Activities Tax Credit in favor of cutting tax rates across the board, reports The Des Moines Register. Democrats in the state have long challenged the tax credit, but Republicans are now looking closer to see what businesses are taking advantage of the credit in an effort to reduce the tax burden across all sectors.

The main issue, according to legislators, is that the tax credits were lopsidedly benefitting major corporations, some of which owed nothing in income tax. Reporters from The Des Moines Register found that Rockwell Collins, Deere & Company, El Dupont De Nemours And Company, John Deere Construction & Forestry Division, and Monsanto Company made up the bulk of the corporations benefitting from the tax credits.

Rep. Pat Grassley of New Hartford’s proposed change to the research tax credit would no longer allow any companies that have previously benefitted from the credit to continue claiming refunds, while retaining the credits for any companies that previously did not benefit from it for at least five years. Any savings from cutting or reducing those credits would then go into a savings account to fund a broader range of tax cuts.

While tax reform is on the table, any real discussion is likely to extend to next year, and some senators feel that any discussion of tax credits needs to be coupled with a look at why such credits are necessary.

“I think it’s important to remember, though, a lot of the tax credits and rebates we give are a symptom of high tax rates, especially income tax rates, relative to other states,” said Sen. Charles Schneider of West Des Moines. “So to the extent we can dial back the tax credits and abatements and rebates while also lowering our overall income tax rates to be more competitive, I think that’s going to help us overall.”

 

Related Content: Small Business News | Economy | Iowa

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