Iowa considers tax break to retain more young adults

Midwest states struggle to stop `brain drain'

February 06, 2005|By MINNEAPOLIS STAR TRIBUNE

AMES, Iowa - The ads flopped. The cocktail parties the governor threw came and went. All the mailings touting the virtues of living a long way from the bright lights of big cities never helped, either.

Iowa, ever the humble suitor, is still struggling to persuade well-educated young adults to stay put, or move back.

But now the state may get brash - by offering them cash.

Iowa's legislature has begun debating an extraordinary bill to exempt anyone under 30 from paying state income tax. No other state with the same affliction - an exodus of residents commonly called "brain drain" - has taken such a step.

"This has been a perpetual problem, and it's not really getting any better," said Jeff Lamberti, a Republican leader in the state Senate. "We have to do something different and bold."

Similar cries are resounding across much of the Midwest.

In Nebraska, state leaders rented a hotel ballroom in Colorado recently and spent a Saturday trying to entice thousands of former residents living there to return home. In Michigan, officials have a new Web site seeking suggestions from young adults for creating hipper cities. Governments around the region are also contemplating a range of incentives - from tax breaks to tuition reimbursement - that might lure more young adults to their states.

"This issue is certainly on the minds of folks more," said Bert Waisanen, a fiscal analyst for the National Conference of State Legislatures. "But I don't think what they're talking about in Iowa has ever been done."

Census figures show that Iowa had a net loss of nearly 12,000 college-educated adults ages 25 to 39 between 1995 and 2000 - a rate of departure second only to North Dakota.

Iowa has been scrambling to stop young people from packing up, or pleading with them to return home, for many years.

It has created a $500 million fund to attract or help expand cutting-edge companies. It has used radio and television ads to promote heartland living. Iowa Gov. Tom Vilsack has hosted receptions around the country for former Iowa residents.

But some say more must be done. Lawmakers who support eliminating state income tax for anyone under 30 say the move would put at least $600 more a year in their pockets. They also contend that the tab for the perk, which by some estimates would exceed $200 million, would be worth the investment.

Some students preparing to graduate from Iowa State University said an annual tax break might make them reconsider leaving.

"That could be an awesome incentive," said Rebecca Kiewiet, 21, a senior majoring in marketing who grew up in a small Iowa town. "But the thing is, you still have to have a good job. And there's not as much opportunity here."

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