image All three of the Iowa Republican gubernatorial candidates say yes, but a couple of economists say not so much.  Donnelle Eller of The Des Moines Register asked two area economists what they thought about the impact of corporate income tax cuts in relation to job growth.

Ernie Goss, economics professor at Creighton University and David Swenson, an economics professor at Iowa State University both questioned the impact that corporate tax cuts could make in regards to job creation citing:

  • Goss stated that numbers tend to be overblown by politicians, and former Governor Terry Branstad’s numbers are at the level outside the experience of Iowa’s job growth rate, but Swenson noted that Iowa came close to the 3% job growth rate needed in 1988 and 1993.
  • Swenson said it would negate the impact of incentives that businesses already receive, like tax credits for research and development.  But I would argue that those tax credits wouldn’t be necessary if companies got to keep their money.
  • Goss noted that states currently with no corporate income tax (like South Dakota) could add more incentives to attract businesses negating the impact of any corporate income tax cut.

Looking at this issue from a national perspective, our corporate taxes are too high, and according to the Heritage Foundation it is impacting our ability to remain competitive.

High corporate tax rates are undermining U.S. international competitiveness. The global economy continues to demand that companies be flexible and swift in order to remain competitive. High tax rates deprive companies of both the means and the incentive to take advantage of new market opportunities or technological changes that can improve productivity.

Most advanced countries in the world have responded to new global economic realities by slashing corporate tax rates. The U.S. stands almost alone in having resisted such cuts, and its corporate tax rates are now among the highest in the world. Future U.S. prosperity depends on the willingness of our political leaders to resist populist anti-corporate dogma and make the necessary adjustments to keep the U.S. economy competitive.

Regardless of whether or not the job growth rate would be as high as what Branstad predicts, something must be done to enhance Iowa’s business climate.  Out of a nation with several states (Iowa included) that leads the world in high corporate tax rates, Iowa is in the top 10 of states with the worst business tax climates ranking 46th out of 50.  Not cutting corporate income taxes can not be an option.

While the economists that Eller cites say that job growth rates may not be stimulated to the level that Republican gubernatorial candidates may want.  Neither say it will have a negative impact, and Governor Chet Culver being at the helm has not helped our business climate.  Are taxes alone going to do the job?  No, there are other factors as well, but it would be a positive step in the right direction to improve Iowa’s status nationally.  Rod Roberts, Bob Vander Plaats and Governor Branstad would all be an improvement over the current administration.  Governor Chet Culver has done nothing to bolster private job creation and instead has put Iowa into debt by inflating public sector jobs which does nothing to spur on our economy.

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