On Wednesday, February 24, 2010, the House Economic Growth Committee concluded its final committee meeting of the session by inviting Iowa businesses to testify on Iowa’s business climate. The meeting marked the first time this session the committee engaged in an in depth discussion with the private sector on the struggles facing Iowa businesses as they work to jumpstart the economy and create jobs.
The panelist that participated in the meeting were Flora Schmidt of the Home Builders Association of Iowa and Mark Hanawalt of United Equipment Accessories, Inc. Schmidt is the Executive Officer for a state wide trade association comprised of 2200 small, independent business owners representing the construction, development, supplier and subcontractor industries. Hanawalt is the President and CEO of a manufacturing and distribution firm specializing in products utilized by the wind energy industry and various other sectors.
Ms. Schmidt began the meeting by highlighting the overall challenges facing Iowa businesses. Specifically, she focused on regulatory mandates and the costs associated with complying with regulations adopted by state and local governments. She indicated that whenever a new code or regulation is adopted a substantial investment of time and money is spent in complying with it, and the costs are almost always passed onto the end user. In the homebuilding industry, this means the cost is passed onto the homebuyer and is realized on the price tag of the house.
However, the consequences of these regulations dictate much more than an increase in the cost of a home. Data suggests that every time the price of a house increases by $5,000, about 21,800 Iowans are unable to afford that house. With less Iowans being able to afford to purchase a house, the demand for building new homes decreases. In Iowa, the construction of 4,000 homes equals approximately 12,300 jobs and generates $656 million in income for Iowa residents and $124 million in taxes and other revenue for state and local governments each year. Therefore, burdensome regulations imposed and adopted by government have a negative ripple effect throughout the economy. They increase the housing costs on Iowans, leaving less disposable income which flows through the statewide economy. They make it harder for families to achieve the “American Dream” of homeownership. And, they cost individuals their jobs, contributing further to the state’s unemployment line.
Ms. Schmidt also highlighted a number of state legislative issues and government hurdles that will increase the cost of doing business on Iowa’s employers and further exacerbate Iowa’s business climate. The laundry lists encompasses everything from legislation to government employees arguing for regulations and against private businesses. They include too many regulations versus voluntary compliance programs.
Mr. Hanawalt was less detailed in his presentation, but just as effective in getting his point across to committee members. He told a story of how his business started and walked members through the expansion process. He also spoke to the issues he believes will enable him to expand further and create additional jobs.
A member of the committee asked him about the one thing Iowa can do, or not do, to help his business. His answer? “To put it bluntly, get out of my way. I am going to grow with or without you.” The message was an echo of the presentation by the previous witness and one that exemplifies the feelings of many Iowa small businesses. Mr. Hanawalt spoke about the need to “leave money in the people’s pockets” in other words, keep taxes low. He suggested that if Iowa truly wants to keep existing businesses here and attract new industries, the state must reorganize its tax code in an effort to reduce taxes across the board. He also put emphasis on the importance of predictability in the tax code. Specifically, he said that implementing a long-term business plan is difficult when the state makes a decision to give businesses bonus depreciation in one year and then takes it away in the next.
Representative Doris Kelley asked for his input on a controversial tax increase proposed last year to eliminate federal deductibility and the effect it would have had on his business. He responded with “It would have increased my taxes, simple. Taking money away that I would otherwise invest in the economy and pay salaries.”
Mr. Hanawalt also spoke on other controversial legislative proposals pending in the Iowa House. He said that every time the state discusses changing Iowa’s Right to Work status or implementing prevailing wage laws, economic development directors in Nebraska and South Dakota contact him asking if he is willing to pick up and move his operations to their state. A stark reality legislators must take into consideration when deciding whether or not to support such proposals.
The message of the meeting is consistent with the message of the House Republican Caucus. In order to turn the economy around and put people back to work, the legislature must focus their efforts on policies that foster a positive economic climate. It is imperative the legislature move away from talking about bills that deter business activity and attempt to balance irresponsible budgets on the backs of Iowa taxpayers. House Republicans remain committed to this strategy and look forward to working with Democrats to pass legislation that helps Iowa employers flourish.