Iowa to review tax credits

On November 19. 2009, Iowa Governor Culver called for state tax agencies overseeing tax credit programs to review them - all 30 of them (click here for press release). The directors of these agencies "will then serve on a panel to review the programs and submit a report to the Governor addressing oversight, accountability, transparency, public reporting, cost-benefit, and which programs should be continued, curtailed, and or eliminated."

Per Governor Culver: "we are reviewing all areas of state spending, including annual state investments in the form of tax credits. It is essential that we evaluate the expense and effectiveness of each tax credit program to ensure that Iowans are receiving an appropriate return on our investment."

This is a post-enactment accountability approach. I think it is good to see the governor remind people that tax credits are a form of spending. In tough budget times, there are calls to cut spending. But not everyone realizes that a good amount of state spending is built into the tax law - deductions, credits and exemptions for certain taxpayers or activities.

The state agencies were to submit their initial reports on the credits they oversee by December 4, 2009. I'm guessing that the goal is to have better information ready soon for the governor and legislators so that they can see if it makes sense in cutting spending to cut some from the tax law.

RadioIowa compiled a list of the credits - here.

Ideally, the governor should also call for a group to look at other tax provisions, such as special deductions and exemptions that like credits, are a form of spending.

Here is a nice letter of support from Joseph Henchman of the Tax Foundation.

What do you think?