Just about everyone in Iowa knows that the Iowa Film Office (IFO) has been embroiled in scandal lately. The office issues tax credits to filmmakers who film in Iowa. By August, IFO had issued more than $31 million in such credits. Unfortunately, some filmmakers have used their money to buy themselves fancy cars, rather than hire Iowans, and the whole operation is shot through with accounting irregularities and poor record keeping.
The whole mess got so bad that Governor Culver actually had to put down his paddleball, amble over and fire somebody. Of course, Culver’s political rivals in the Republican Party are capitalizing on the scandal. They could run the IFO better, they contend. Other critics say that the IFO needs stricter oversight. But should IFO and other similar incentive programs exist at all?
There are nut-and-bolts reasons that indicate that they shouldn’t. A study by New Mexico State University found that for every dollar that N.M. spent on it’s film program, it got back 14 cents in tax revenue. (The state of N.M. claims it gets $1.50 back.) The Wisconsin Dept. of Commerce found that for every dollar that it invests in it’s film program, it gets back $1.70. For other economic development programs, the return on each dollar invested was said to be $161.
Victor Elias with the nonpartisan Child and Family Policy Center has studied Iowa’s film tax credit. He says that there is little evidence that the program does much of anything. “I couldn’t even figure out how many jobs this creates,” said Elias. “Whether they were full-time jobs or part-time jobs. And a film shoot only lasts for so long, so we’re not talking about permanent jobs.” $31 million is a lot of hard-earned taxpayer dollars to invest on hope alone.
Even if the incentive program was well-run and got a return on the investment, it (and special incentive programs for other industries) don’t really make sense. While it may now be customary for state and local governments to offer special goodies to get targeted businesses to relocate here, it comes at the expense of people and businesses who have already invested their time and money here.
According to Iowa’s Tax Education Foundation, Iowa has the highest corporate and personal income taxes among it’s neighboring states. Some have ranked Iowa as one of the worst states to start a business. Does it make sense to offer monetary incentives to get businesses to locate here, while simultaneously driving established businesses out?
It would make more sense to implement policies making the state attractive to new businesses and existing ones as well. Lowering state taxes and red tape would be conducive to all commerce in Iowa.
The bottom line is that there is no cash incentive that government can offer to new business that it didn’t first take away from the people and industry already here. The state needs to forget the bribes and just get out of the way.