Defenders of tax credits always point to the jobs on credit-financed projects as proof the credits work. Their defense, like that given by the Dubuque mayor in the tax credit hearing held in Cedar Rapids yesterday, always skips over an important point: that money could have been spent somewhere else.
Money for tax credit projects doesn’t spring into existence out of nowhere when the tax credit investors file their tax returns. It comes from other taxpayers who have to pay extra taxes in place of the credits claimed on the tax credit project.
They also miss another point. When the government subsidizes a real estate project with tax credits, it pays the developer to take tenants from other landlords or landowners. A subsidized commercial rehab project takes tenants away from a developer who didn’t get subsidies. A subsidized low-income housing project punishes the landlords who don’t get handouts. When Jim Cownie gets a subsidy, the struggling do-it-yourselfer who buys a duplex to fix and lease out gets a powerful subsidized competitor.
Occasionally Iowa will land a corporate welfare-seeking company by throwing money at it. By increasing taxes to do so, it drives out the small entrepreneurs that do the heavy lifting of job creation. But they never invite politicians to ribbon cuttings, so as far as economic development officials are concerned, they don’t count.

Tags: corporate welfare, economic development, iowa tax policy, opportunity costs, Tax Credit Report, tax credits

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