IPP: Iowa Manufacturing Jobs Continue Decline Despite Tax Break

Jun 6, 2017

An Iowa research group says manufacturing jobs continue to decline in the state, even after a new sales tax break was given to manufacturers. 

According to the Iowa Policy Project, a tax break that makes more manufacturing supplies exempt from state sales taxes has not led to more jobs in the manufacturing sector.

The statement comes after the Legislative Services Agency announced that tax break could cost the state about $100 million. It was originally expected to cost about $21 million. 

Iowa Policy Project Executive Director Mike Owen says proponents of the tax break cited a common policy idea that lowering taxes leads to more jobs. 

"At the same time we're seeing lower revenues in the sales tax, we're also seeing jobs continue to decline in the manufacturing sector," Owen says. 

Owen says mixing politics with economic analysis may have led to overly optimistic revenue projections. 

The LSA can't know for sure if the expansion of manufacturing tax breaks is responsible for the full $100 million reduction in tax revenue. But a top LSA analyst says he believes the sales tax break could be the reason for the shortfall. 

Gov. Kim Reynolds says she will weigh options to deal with the additional revenue shortfall.