Iowa pays companies incentives that amount to $50,000 per job

DES MOINES – Iowa officials handed out more than $274 million in incentives to land 163 new companies or the expansion of others in the past two years, according to an Iowa Watchdog analysis of state figures.

In exchange, the companies have agreed to add 5,386 jobs and retain another existing 2,835 that would have otherwise been eliminated. When broken down, that equates to the state paying just less than $50,000 for each new position. It’s estimated those jobs will carry an average wage of $16.79 an hour, or roughly $35,000 annual salary.

Google and other companies cash in on tax incentives from Iowa.

Those figures don’t include recent record-breaking deals with tech giants like Google and Microsoft, which will cost the state an additional $30.3 million in exchange for 149 jobs.

Some have criticized state officials for the deals, which pay big bucks – all taxpayer dollars – for a small amount of largely low-paying jobs. The companies that receive the incentives most likely would have come to the state regardless of the incentives, some researchers say.

“The only social good we should be able to get from government is employment; not just decent jobs but decent employment,” said Dave Swenson, an economist with Iowa State University. “The trick is for the government to give the least amount of money to get the most social good. We have allocated a lot of public tax forgiveness in the name of very few jobs. It’s how many jobs and the money they make that matters.”

Since taking office in 2011, Gov. Terry Branstad has said his goal is to create more than 100,000 new jobs. His administration pushed for the creation of the Iowa Economic Development Authority, which replaced the Iowa Department of Economic Development. The authority is a public-private partnership that has landed record-breaking deals with tech giants and fertilizer companies who plan to invest hundreds of millions into new plants in the state.

The companies, however, have promised only a handful of jobs in return.

While some criticize the deals, others say mega deals were necessary to land companies in a depressed economy in which states have upped the ante to attract companies and the expansion of existing employers.

The number of jobs might be low, but the state will ultimately gain income from capital investments that top $6.6 billion and feed the economy through the additional work they provide for current employers like mail shippers, electricians, construction workers, and others.

Most of the incentives also come in the form of tax incentives, which means the companies must earn taxable income in Iowa to cash in on the benefits, some say.

“These are big facilities that tend to involve a lot of ongoing infrastructure maintenance,” said David Bernstein, chair of the authority’s board. “We approve projects like this because of the amount of money they spend and the amount of money they continue to spend year in and year out. They spend a lot of money year in and year out.”

Contact Sheena Dooley at dooley@iowawatchdog.org. Sheena Dooley is the Iowa bureau chief for Watchdog.org, where this story first appeared.