February 11, 2011 Don't hike gambling tax for corporate break The Register's editorial

Iowa’s gambling industry responded as expected to Gov. Terry Branstad’s proposal to raise gaming taxes by as much as 63 percent. Tracks and casinos say the steep hike would either drive them out of business or cause severe hardships for employees and the communities and that rely on them for jobs, charitable donations and tourism. That may be an exaggeration, but even if it is, Branstad’s plan to raise gambling taxes to offset a $200 million corporate income-tax cut makes no sense. There is no compelling reason to cut corporate taxes, and the governor’s proposal would have negligible economic effect: Rather than being targeted to help businesses that are likely to add new workers — that is, small businesses that typically don’t pay corporate income taxes — the benefit would be spread so thin as to be a meaningless economic incentive for big companies to expand in Iowa. It is curious that a Republican as allergic to taxes as Branstad would suggest any tax increase, even on gambling. Apparently the governor believes Iowans have no particular affection for the gambling industry. That may be true in the abstract, but they enjoy the fruits of wagering in their own communities. Polk County, to take just one example, is paying for construction of the Iowa Events Center with cash flow from Prairie Meadows Racetrack and Casino, and the supervisors still have money left over to help balance the county budget. Not to mention the more than $460 million that has gone to charity, schools and other causes over the years. Multiply that times the 16 other tracks and casinos in Iowa, and it is easy to see a casino tax hike will be a tough sell. Meanwhile, four new casinos wer recently approved in rural counties and struggling communities that had been left out of the gaming bonanza enjoyed by the river cities and Des Moines. It would be cruel for the state to pull the rug out from under them just when they finally get a piece of the action. Branstad’s proposed corporate income tax cut is largely symbolic: Iowa’s top rate of 12 percent is the highest in the country, but that statistic by itself is highly misleading: The actual tax rate paid by corporations is half that amount after deducting their federal tax liability. While most states tax corporations on a formula that includes sales, property and payroll, Iowa taxes only sales — and only in-state sales. For extra measure, Iowa has created a long list of tax credits that allow corporations to further reduce their bills, or in some cases receive refunds over and above their tax liability. There simply is no evidence that corporations are overtaxed in Iowa. In fact, according to calculations released Wednesday by the Iowa Fiscal Partnership, total taxes collected from Iowa-based corporations as a percentage of the state’s gross domestic product amounted to about a quarter of 1 percent in 2009. This puts Iowa 40th out of 50 states. Adding new jobs in Iowa is a top priority, there is wide consensus that best way to make Iowa attractive for business expansion is to offer good workers, good schools, livable communities and clean air and water. Iowa won’t get there by simply lightening some businesses’ already light tax burden.