One of the chief issues in the 2010 gubernatorial election will be job creation. The unemployment rate in Iowa is now 6.7%, and over 112,000 Iowans are currently out of work. To make matters worse, many Iowa businesses are now deciding whether to leave the state, as Electrolux’s recent announcement indicates. Republicans can win the governorship next year if their gubernatorial nominee has a credible, effective plan to create jobs. I have such a plan: elimination of the corporate income tax.
Iowa’s corporate income tax is a progressive tax that has marginal rates ranging from 6-12%. This means that as Iowa corporations generate more income, they not only pay more taxes, but they do so at a higher rate. This has the perverse effect of penalizing Iowa businesses for their ingenuity and efficiency. To make matters worse, Iowa’s progressive corporate income tax discourages new businesses from coming to the state. But in the end, it’s not just businesses that are hurt by the corporate income tax. The people of Iowa are the ones who ultimately feel the brunt of the tax due to lost jobs. This is wrong. We should be rewarding efficient business practices, not penalizing them, and we should be doing everything we can to help hardworking Iowans.
Eliminating the corporate income tax will bring new businesses to the state and will help retain current ones. This will create more jobs, which will help Iowa keep more of its talented young adults from leaving the state to find employment. Further, eliminating the corporate income tax will help the state improve its poor reputation with the national business community. An article in the U.S. News and World Report earlier this year called Iowa the second-worst state in the country to start a new business. We need to tell the nation that Iowa is “open for business.” If we eliminate the corporate income tax, you can trust that businesses will hear this message.
My plan to create jobs and to jumpstart Iowa businesses contrasts starkly with the plan that Governor Culver has chosen. Governor Culver’s plan to deal with Iowa’s unemployment rate has been to increase state government spending by borrowing money for a program called I-JOBS. Governor Culver has the view that government is a better creator of jobs than the private sector. I reject that philosophy. Rather than raising state spending, I will eliminate the corporate income tax to let the private sector do its work to lead our state to long-term economic growth and stability.
Elimination of the corporate income tax will also help the State of Iowa avoid embarrassments like the Iowa Film Office’s recent tax-credit scandal. This scandal occurred after state government began issuing tax credits to determine the winners and losers among film producers operating in Iowa. Under the plan, some self-interested film producers claimed tax credits for purchasing luxury vehicles like Range Rovers and Mercedes, while other film producers inflated their production costs to receive larger-than-deserved tax credits.
The film-tax-credit scandal illustrates the risks present when state government tries to determine the winners and losers of economic competition. We should do away with poorly run tax-credit programs like the one operated by the Iowa Film Office. Doing so will ensure that the free market—rather than state government or special interests—determines whose business efforts are rewarded. Moreover, by decreasing state spending on poorly run tax-credit programs, we can eliminate the corporate income tax—which amounted to $251 million in revenue for fiscal year 2009—while also balancing the state’s budget.
While my plan to eliminate the corporate income tax is attractive because it will create new businesses and jobs in the state, it is also attractive because it is doable. The corporate income tax amounts to about 5% of the state’s tax revenue. This is certainly a sizable amount and elimination of the tax will undoubtedly provide a substantial benefit to Iowa businesses. At the same time, eliminating the corporate income tax can be achieved without devastating the budget. As a conservative, I believe tax reform should be a priority for our state government. I applaud the other Republican gubernatorial candidates who have advocated for tax reform. But eliminating the corporate income tax is my chief priority for tax reform because it is both achievable and it will have a dynamic affect upon the Iowa economy.
Endorsing bold tax reform is important because the State of Iowa is at such a critical moment. Iowans are worried about the future of their state, and they are looking for a Governor to provide leadership and to create jobs. Although we need to be candid with Iowans about the tough economic challenges that lie ahead, we need to provide action. As Governor, I want to have an effective economic development tool to aggressively market the State of Iowa as a pro-growth, business-friendly state. I want businesses to succeed in Iowa, and I want Iowans to have solid, good paying jobs in order to provide for their families. Elimination of the corporate income tax will put Iowans back to work, help keep Iowa businesses in the state, and will lure new businesses to the state to help grow Iowa’s economy. As Governor, I will eliminate the corporate income tax.
Written by Rod Roberts
Photo by Dave Davidson
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