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September 2012 Policy Study, Number 12-11

   

Orascom or OraScam? Corporate Income and Property Tax Reform Needed

   

OraScam?

   

 

In his book, The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation, author and researcher Greg LeRoy states, “Corporations are asking for them – and getting them – because everyone is giving them out. TIFs (and other favorable tax exemptions) have become the standard handout, and the businesses have learned how to play one city off against the other.” He adds, “Businesses would be stupid for not asking for them every time.” This fact alone argues for a significant revision of the overall Iowa corporate income and property tax structure.

 

The only reason the OCI deal has attracted attention is because it is the biggest capital investment made in the state by any company, ever. Most Iowans don’t just throw around the “B” word, and we are rightfully questioning the decisions of our elected and appointed leaders.

 

Interestingly, Mr. Sawiris, owner of OCI, has also publicly stated that his company will “forgo” $50 million in tax credits if the Iowa overall corporate income tax rate is lowered.[31] Does that sound like someone who is interested in taking Iowa to “the cleaners”? Or like a businessman with significant experience, who is trying to get the best deal possible for his company and his shareholders? Can anyone really blame him? Or should we be blaming the politicians who perpetuate the “jobs scam” in order to collect campaign contributions from the “winners”?

 

Sawiris recognizes that the corporate income tax and corporate property tax structures of various states impact the profitability of his company. He also recognizes that locating in southern Iowa, near the Mississippi River, near major rail lines and interstate highways, and most importantly – near his customers – is a good thing. He appears to be a very aggressive and successful businessman, simply trying to get the best deal possible.

 

The Iowa Legislature failed to take significant action on either the Tax Increment Financing system or commercial property and income taxes this Legislative session. The opposition to the far reaching proposals from Governor Terry Branstad and the Iowa House of Representatives was led by State Senator Bolkcom and his political party. The proposals supported by Senator Bolkcom would not have positively impacted Iowa Fertilizer or other recent IEDA tax rebate and loan recipients, as they were narrowly targeted at only the smallest businesses.

 

As Iowa has some of the highest corporate income tax rates and corporate and apartment property tax rates in the nation, it is clear that this must be addressed. Recognizing that the tax incentive issue for Orascom remains problematic, Governor Branstad addressed this in the announcement of the deal, saying, “Even with (Illinois’) tax increases and poor fiscal management, Iowa had difficulty competing because our tax climate is worse for a project like this with substantial sales to farmers in Iowa,” Branstad said. “If that doesn’t wake us up, I don’t know what will.”[32]

 

   

 

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