• About Us
  • Advertise
  • Contact Us
  • Privacy Policy
Saturday, May 10, 2025
The Iowa Torch
  • Home
  • State Government
  • Federal Government
  • Local Government
  • Politics
  • Education
  • Opinion
No Result
View All Result
  • Home
  • State Government
  • Federal Government
  • Local Government
  • Politics
  • Education
  • Opinion
The Iowa Torch
The Iowa Torch
No Result
View All Result
Home Opinion

Farren & Hendrickson: Is There a Solution to Iowa’s—and America’s—Stadium Subsidy Cronyism?

Michael Farren and John Hendrickson: Should Iowans continue throwing money at the hamster wheel of economic development?

Michael FarrenJohn HendricksonbyMichael FarrenandJohn Hendrickson
March 2, 2021
in Opinion
Reading Time: 4 mins read
Farren & Hendrickson: Is There a Solution to Iowa’s—and America’s—Stadium Subsidy Cronyism?

A rendering of a 6,300-seat soccer stadium and adjoining pedestrian plaza planned by Pro Iowa and Krause+ on in downtown Des Moines.

Des Moines is rightly excited about plans to build multiple new sports facilities. But Iowa taxpayers ought to be concerned about the city’s request for $57 million in state subsidies to underwrite real estate developers’ profits. Cronyism of this sort has been a consistent problem across America, but there’s hope on the horizon.

RELATED POSTS

Feenstra: Lowering the cost of childcare for our families

Grassley: History informs farm policies of today

Hendrickson: Iowa taxpayers win big in 2024

States have been locked in a perpetual “arms race” since the Great Depression, when Mississippi used subsidies to poach companies from other states to jumpstart its own economic growth. “Get jobs quick” schemes turned out to be easy for politicians to campaign on, even though academic research finds that subsidy programs don’t create widespread economic benefits.

Iowa’s most famous recent example was the $214 million Apple received in 2017, but there have been a steady stream of smaller subsidies that add up to a startling total over time.

According to data gathered by Good Jobs First, from 2000 through 2019, Iowa provided over $3.8 billion in public subsidies for private corporations. A 2018 analysis by the Mercatus Center at George Mason University found that if Iowa eliminated subsidies, it could help all businesses by lowering its corporate tax rate by an astounding 36 percent—double the reduction of Iowa’s actual 2018 corporate tax reform. Or, it could reduce everyone’s taxes by 1.9 percent. 

Put a different way, the last 20 years of corporate subsidies have cost Iowans at least $3,100 per household. It’s like a game of musical chairs: Politicians pull the seat out from under families and small businesses to privilege politically influential corporations.

ADVERTISEMENT

Local leaders share the blame. Intercity competition can create even more waste than state subsidies. For example, Iowa Bankers Insurance and Services, Inc. received $2 million to move its headquarters only one mile from Johnston to Urbandale.

Pro-subsidy arguments hold that “industry clusters” create long-term economic growth, but most clusters are natural, rather than government-created. Automobile manufacturing is the classic example: Detroit’s metalworkers, centered between material suppliers and customers, provided the optimal place for carmakers in the early 20th century.

More than any subsidy, Des Moines’ central location at the confluence of major fiber optic lines makes it a natural place to build a data center. Yet Iowa and local governments have provided hundreds of millions to Amazon, Google, Microsoft, Apple, and Facebook to do just that. It’s the opposite of “Build it and they will come”—they were already coming.

Similarly, most subsidies don’t drive location decisions. Other factors, especially the availability of talented workers and access to supply chains and customers, are more important. Leading economic development researcher Timothy Bartik concludes that the average subsidy sways a company’s decision only about 12.5 percent of the time. In other words, almost 90 percent of subsidies are a complete waste of public resources.

Thankfully, many policymakers hate the arms race they feel trapped in. But they’re understandably fearful of the political cost of unilaterally disarming. 

An interstate compact offers one idea. Part of the Constitution, this tool allows states to enter into contractual agreements, like simultaneously forswearing subsidies. Rep. Mary Mascher (D-Iowa City) made Iowa one of 16 states where this bipartisan legislation has been introduced. If successful, it could free up the estimated annual $95 billion spent on subsidies by state and local governments for more effective uses.

Regardless of the answer, here’s the question: Should Iowans continue throwing money at the hamster wheel of economic development?

Tags: Des Moineseconomic developmentstadium developmenttax policytax subsidies
ShareTweetShare
ADVERTISEMENT
Previous Post

Iowa Bill Prohibiting Race and Sex Stereotyping in Diversity Training Advances

Next Post

Iowa Teacher: Why I Resigned After 25 Years of Teaching

Michael Farren

Michael Farren

Michael D. Farren is a research fellow with the Mercatus Center at George Mason University.

John Hendrickson

John Hendrickson

John Hendrickson is the Policy Director for ITR Foundation.

Related Posts

image of old building on american banknote
Opinion

Hendrickson & Gugel: Congress must act to stop the ticking tax time bomb Iowans face.

February 7, 2024
Opinion

Hendrickson: Another banner year for state tax cuts, will Iowa continue to lead in 2024?

June 29, 2023
Reynolds signs bill phasing in 3.9 percent flat tax
News

Iowa’s top income tax rate still higher than most states, but change is coming

March 1, 2023
tax documents on the table
Opinion

Sherman: Iowa consumers at risk of double taxation, thanks to Congress

September 7, 2022
Laura Baumgartner appointed as City Clerk for Des Moines
Local Government

Laura Baumgartner appointed as City Clerk for Des Moines

July 19, 2022
traffic industry charging car
Opinion

Curry: Drive a Tesla, get free property taxes

May 3, 2022
Next Post
Iowa Teacher: Why I Resigned After 25 Years of Teaching

Iowa Teacher: Why I Resigned After 25 Years of Teaching

Hinson Speaks Against Federalizing Elections

Recommended Articles

Iowa Dept. of Health & Human Services fill two leadership roles

Iowa Dept. of Health & Human Services fill two leadership roles

July 19, 2022

Iowa Senate Sends COVID-19 Vaccine Passport Ban Bill to Governor’s Desk

May 6, 2021
State Auditor Calls for Targeted Spending for COVID-19 Relief

State Auditor: Iowa’s Medicaid Privatization Increases Illegal Denials of Care

October 21, 2021

Popular Stories

  • Three LGTBQ Books with Sexually Explicit Material Pulled from Waukee School

    Three LGTBQ Books with Sexually Explicit Material Pulled from Waukee School

    0 shares
    Share 0 Tweet 0
  • Rozenboom: Reflecting on the First Week of the 2021 Legislative Session

    0 shares
    Share 0 Tweet 0
  • Iowa Dept. of Health & Human Services fill two leadership roles

    0 shares
    Share 0 Tweet 0
  • Fauci ends taxpayer-funded experiments on dogs

    0 shares
    Share 0 Tweet 0
  • Democrat Blocks Ernst’s Bipartisan Effort to Honor Global War on Terrorism Veterans

    0 shares
    Share 0 Tweet 0
The Iowa Torch

The Iowa Torch​ is a for-profit, news organization that focuses on political news as it relates to Iowans

Categories

  • Current Events
  • Education
  • Federal Government
  • Iowa History
  • Local Government
  • News
  • Opinion
  • Politics
  • State Government

Newsletter

© 2022 The Iowa Torch, a publication of 4:15 Communications, LLC.

No Result
View All Result
  • Home
  • About Us
  • Advertise
  • Contact Us
  • State Government
  • Federal Government
  • Local Government
  • Politics
  • Education
  • Opinion

© 2022 The Iowa Torch, a publication of 4:15 Communications, LLC.