The $1.5 Billion Question: Why the Rush to Subsidize?

Iowa’s proposed $15 billion steel mill could bring thousands of construction jobs and 1,750 permanent jobs to southeast Iowa. That’s welcome news for a region that could benefit from a major new employer.  

Iowa ranks last in key economic indicators

WalletHub ranks Iowa last in economic growth (51st nationally, including the District of Colombia), and data from the Federal Reserve Bank of Philadelphia and the Bureau of Economic Analysis places Iowa at the bottom of the country for short-term real GDP and personal income growth.

But before Iowa taxpayers celebrate, there’s a question worth asking: If the company has already decided to build here, why are we offering it more money?

Lutnick says the “deal is done” but apparently Reynolds disagrees

During Monday’s White House announcement, Commerce Secretary Howard Lutnick said the deal was done and did not depend on state tax incentives.

The next day, Gov. Kim Reynolds called a special session of the Iowa Legislature for Friday, October 2, to increase the tax incentives available for the project.

What changed?

How much could this cost Iowans?

Iowa’s existing Major Economic Growth Attraction (MEGA) program offers qualifying companies an investment tax credit of up to 5%. Reynolds wants to raise that ceiling to 10% for one project, with the credits spread over ten years.

For a $15 billion project, that could mean as much as $1.5 billion investment tax credits, assuming the entire investment qualifies and the maximum credit is awarded. That’s $750 million more than the current 5% ceiling would allow.

Other incentives, including payroll withholding credits and sales-tax refunds, could add to the total.

Credits to be delayed until the facility is in service

The investment credits would not be paid immediately. According to the Des Moines Register, the company must first put the facility into service and create at least half the jobs promised in its agreement with the state. The program also provides ways to recover incentives if the company fails to meet its obligations.

Those protections matter. But so does the size of the commitment Iowa is being asked to make.

So, why the hurry?

The steel mill isn’t expected to begin producing steel until 2030. Yet Reynolds wants lawmakers to approve changes to the incentive program just four days after Trump announced the project. The special session also comes barely a month before the November 3 election.

There may be a legitimate business reason for acting immediately. If so, Reynolds should explain it. Does the company need these additional incentives to proceed? Is there a financing deadline? What happens if lawmakers wait until their regular session?

And if Lutnick was right that the deal was already done without state incentives, why is Iowa considering doubling the maximum tax credit?

A good deal for whom?

A new steel mill could bring substantial benefits to southeast Iowa. But a $15 billion investment by a private company is not the same thing as a $15 billion benefit to Iowa taxpayers. Tax credits reduce state revenue or, when refundable, can result in payments to the company. That’s money Iowa cannot spend elsewhere without finding additional revenue or reducing other expenditures.

The question isn’t whether Iowa should welcome a major new employer. It’s how much taxpayers should contribute, what they’ll receive in return and whether the additional incentives are actually necessary.

Before Friday’s vote, lawmakers should make the proposed agreement, the full cost of the incentives and the reason for the rush available to the public.

Howard Lutnick says the steel mill deal is already done. If that’s true, Iowa taxpayers deserve to know why they’re being asked to sweeten it.