Dave Swenson, an Iowa State University economist, has taken a critical look at the current inhabitants of the Iowa Legislature, trying to find someone with a working knowledge of tax policy. His conclusion: The body is coming up a little short in brain power.
There are few tax and policy experts in the House and Senate, he told a packed room at the Iowa Commercial Real Estate Expo Tuesday in West Des Moines. It was a crowd with more than a passing interest in tax policy, especially as it pertains to the properties they manage, market and lease.
"Unlike legislatures of yore, there really appears to be precious few tax policy experts in the Iowa House or Senate able to exert both intellect and moderation into contemporary tax policy debates," he said.
Swenson is entering his fourth decade of studying Iowa tax policy. He has developed a reputation for examining data and delivering messages that aren't always well-received, especially by people pushing agendas that are driven more by politics than the desire to establish sound fiscal policy.
He joked that he has frequently testified about tax policy, but he's never certain that anyone is listening.
"No one has heeded one word of advice," he said. It's no little wonder that he is invited back.
Swenson set about to dash a few "articles of faith" regarding Iowa taxes, among them that we live in a high-tax state and that business taxes are strangling economic growth.
"We are genetically coded to hate the property tax," he said. "And if you are from rural Iowa, you are double genetically coded."
Farmers and homeowners have managed to control the tax debate in Iowa, Swenson said. Owners of commercial property have not. It is the only class of property taxed at its full value, and that situation has stirred considerable debate in the Legislature.
Gov. Terry Branstad has led the charge to lower commercial property taxes and, for the most part, the business community has cheered him on.
Since 1978, commercial property taxes have moved from making up a little more 10 percent of all property tax receipts to about 30 percent in fiscal 2011, he said. On the other hand, property taxes make up less than 2 percent of the state's gross domestic product.
Swenson pointed out that business taxes also are returned to taxpayers or reduced in several ways, through tax abatements, for example. Even the frequently lambasted 12 percent corporate tax rate is misleading, given that state only taxes profits on times sold within its borders and provides a 50 percent reduction from federal taxes. Companies such as Deere & Co. and Pioneer Hi-Bred International Inc. also receive sizable research activities tax credits.
Growth in commercial property taxes as a share of taxes has grown along with growth in personal income, Swenson said. Over the last two decades, most capital consumption has occurred in the commercial sector.
Swenson did provide a possible solution to governments wanting to balance strained budgets.
"If we could tax dumbness, we could balance a lot of budgets," he said.