• About Us
  • Advertise
  • Contact Us
  • Privacy Policy
Saturday, January 28, 2023
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

Hendrickson & Williams: To achieve meaningful property tax relief, right size government 

Reynolds: An open letter to Iowans about school choice

Miller-Meeks: Improving American healthcare

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 TEF Iowa.

Related Posts

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
Hendrickson: Fiscal Conservatism Should Guide 2021 Legislature
State Government

Iowa Legislature passes bill switching business property tax credits to exemptions

March 22, 2022
Local Government

Des Moines ends mask mandate for city buildings

February 28, 2022
Six projects in Iowa receive $22 million in tax credits for historic preservation
State Government

Six projects in Iowa receive $22 million in tax credits for historic preservation

February 14, 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

Sign-Up For Our Daily Updates

Get The Iowa Torch right in your inbox!

Please wait...

Thank you for signing up!

Recommended Articles

Hinson, Miller-Meeks, Axne, and Feenstra Sworn Into 117th Congress

Majority of Iowa’s U.S. House members vote to codify same-sex marriage

July 21, 2022

Feenstra Selected to Serve on House Agriculture Committee

January 26, 2021
Speaker Pat Grassley Announces Updated Iowa House Committee Assignments

Republicans expand majorities in Iowa Legislature

November 9, 2022

Popular Stories

  • Reynolds signs bill creating education savings accounts

    Reynolds signs bill creating education savings accounts

    0 shares
    Share 0 Tweet 0
  • Miller-Meeks: Improving American healthcare

    0 shares
    Share 0 Tweet 0
  • Local Rap Artist’s Non-Profit Receives Grant to Help At-Risk Youth Graduate

    0 shares
    Share 0 Tweet 0
  • Iowa House Republicans outline priorities with first 13 bills

    0 shares
    Share 0 Tweet 0
  • Iowa Senate Passes Governor’s School Choice Bill

    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

  • Education
  • Federal Government
  • Iowa History
  • Local Government
  • News
  • Opinion
  • Politics
  • State Government
  • Uncategorized
  • Uncategorized

Newsletter

Please wait...

Thank you for signing up!

© 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.