Democratic gubernatorial candidate Fred Hubbell is proposing to rein in tax incentives for businesses and “claw back” a 6-year-old property tax cut to help pay for education — specifically at Iowa’s public universities and community colleges.
“We should be freeing up that money and using that money to fund the regents’ schools more effectively, and the community colleges, so they don’t have to raise tuition nearly as much,” Hubbell said about $160 million in economic development tax credits he calls “wasteful corporate giveaways.”
But whether by repealing tax cuts, eliminating business tax incentives or by other actions, Hubbell’s answer to the state’s financial problems “seems to be higher taxes on anything that moves — including Iowa’s middle-class and small businesses,” countered Republican Gov. Kim Reynolds’ campaign spokesman Pat Garrett.
He also pointed to Hubbell’s recent comments that he would have vetoed the state income tax cuts approved by the Iowa Legislature.
“I would have vetoed the law if I had a chance to veto it because it’s fiscally irresponsible,” Hubbell said in an appearance on Iowa Public Television’s “Iowa Press.” However, he added, “there are some things in that tax law … which I think are good, we’d like to try to keep those.”
Hubbell made his comments about redirecting money to higher education last week after touring the Kirkwood Community College Regional Center in Coralville.
He was asked about the Board of Regents unanimously approving tuition increases earlier this month that will equate to $284 for resident undergraduates at Iowa State University and the University of Iowa and $209 for resident undergrads at the University of Northern Iowa next academic year.
Hubbell, a retired Des Moines businessman, repeatedly has attacked tax cuts and incentives that lawmakers in both parties have approved over the years. Iowa’s system of tax credits, deductions and exemptions “creates winners and losers depending on who has the best lobbyist or the most creative accountant,” he said on his campaign website. He called it “patently unfair.
In 2017, the state awarded nearly $209 million in tax credits, some of which are refundable and transferable credits the recipient can sell.
As Democratic Gov. Chet Culver’s interim director of Iowa Economic Development in 2009, Hubbell participated in a tax review panel that studied tax credits and incentives. He said that if the split-control Legislature had followed his recommendation at the time for capping and eliminating incentives, the state would have saved $161.5 million annually.
Today, as the Republican-controlled Legislature and Reynolds have been cutting taxes, they also have been cutting support for health care, higher education, infrastructure investment, courts and other state services, Hubbell asserted.
Hubbell also suggested the state should “claw back” the historic commercial property tax cuts the Iowa Legislature approved with bipartisan support in 2013.
In exchange for the tax cut, lawmakers approved “backfilling” local property tax revenues to help make up for the loss to local coffers — money used to finance the daily operations of cities and counties. This year, the state is paying cities and counties about $152 million in backfill.
“This Legislature talks frequently about stopping the backfill … because we’re not getting any benefit from reducing the tax,” Hubbell said. “So maybe we should claw back the tax which frees up money a little faster than we can accomplish that way.” He wants to see those commercial property taxes increase to the point they cover the cost of the backfill to the state.
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Hubbell acknowledged that it likely will take bipartisan support to rein in tax incentives. Legislative Democrats and Republicans have talked about doing that, but there has been little in the way of action.
So Hubbell said he would attempt to strike a deal with the business community.
“For the last eight years this prior governor and current governor have been consistently reducing taxes and reducing investments in education and health care,” he said. “We’ve gone from No. 1 in the country in education to average. We’ve got employers screaming for more people and more trained people. The reason we can’t find them is because we’re not investing to keep our people here, we’re not investing to give them they kind of trained people they need.
“So let’s make a deal with the business community. Let’s stop these shortsighted things and let’s invest in your future workforce,” Hubbell said. “That’s what the state needs and that’s what they need. They need someone to run our government and to invest in businesses future and not the short-term results.”
That might be a hard sell to business groups that lobbied for those credits and have shown little interest in seeing them eliminated.
“My initial reaction is that’s what the businesses do — they do invest in the future of their businesses,” said Nicole Crain of the Iowa Association of Business and Industry. “They do what’s best for the company. They invest in employees. They invest in training. They invest in technologies.”
The economic development tools such as tax credits help keep Iowa competitive with other states and nations in attracting businesses, Crain said.
“The Iowa economy goes beyond our borders,” she said.
Hubbell seems be ignoring actions the Reynolds administration has taken to “upskill” the workforce, her campaign spokesman said.
“We’re making significant new investments in scholarships, apprenticeships and dual enrollment courses,” Garrett said.
In fact, while at Kirkwood, Hubbell heard from that more than 6,300 high school students from the center’s seven-county service area are enrolled in its courses that offer college credit or certificates in vocational skills. The dual enrollment option has saved those families more than $7.3 million in the past year.
“These initiatives are already helping Iowans find the skills they need for the good-paying jobs that exist all across the state,” Garrett said.
To meet the needs of Iowa employers, Reynolds won legislative approval of her Future Ready Iowa initiative that aims to increase the state’s skilled workforce. The goal is for 70 percent of Iowa’s workforce to have education or training beyond high school by 2025.
Hubbell faces Reynolds in the Nov. 6 general election.