Entrepreneurs and Iowa Employment Tax

by Paul Deaton

What will be the business climate in Iowa as a result of a Branstad administration? A neighbor of mine, who is an entrepreneur and owner of a mid-sized business is finding out and not liking it.

According to the Cedar Rapids Gazette, Tom Cardella, chief executive officer of Thomas L. Cardella and Associates, recently announced that he had reviewed his three year business plan because of a projected 2011 increase in payroll taxes in the state of Iowa. Because of legislation signed into law by then Governor Branstad, when unemployment rose during the recent recession, unemployment claims increased and triggered an increase in payroll taxes to prevent Workforce Development from going bankrupt. Cardella did not care for the Branstad unemployment tax law’s 21st century implications and decided to move his planned 700 job expansion from Iowa to Texas where employment tax law is more favorable.

Even though we are “neighbors,” the author has not met Tom Cardella. I met his wife, Lori Cardella, when she ran for county supervisor during a special election earlier this year. She seemed to be a decent person and the Cardellas’ generous and appreciated financial contributions to our community have not gone unnoticed.

After the special election, Blog for Iowa reported on the Cardellas’ commitment to Iowa. They seemed like most people in that they do what they must to further their career. When Tom Cardella speaks of the advantages of locating his call center expansion in Texas, what he fails to note is that the more favorable employment tax environment resulted in the Texas unemployment fund going broke during the recession and having to borrow $1 billion from the federal government to maintain solvency, according to the Gazette. Perhaps Branstad’s plan to ensure solvency of the Workforce Development Unemployment Fund was better than what Texas has in place, even if employers have to pay more during a recession.

Most mid sized employers refrain from discussing their tax burden as publicly as has Cardella. In a December 8 letter to the Solon Economist, Cardella displayed a harsh view of Iowans that employees can expect from his company. He did this from a self described “business owner’s point of view.”

The call center business, which is what Thomas L. Cardella and Associates does, competes in a global marketplace. That Cardella has been able to create jobs in Iowa helps his employees. However, global competition from India, the Philippines, and other ascendant players can be expected to drive down prices. As a businessman, Cardella will be forced to seek out the lowest costs to maintain profitability, as would any company that competes globally.

It is a credit to Cardella that he indicated in the letter that he would maintain his current Iowa workforce. Realistically, how long is that possible when people in the Philippines demand much lower compensation than what Iowans need to earn a living wage? In the end, working in a call center may be good to help pay the bills in the short run, but that business seems particularly vulnerable to global competition for jobs and does not offer many long term opportunities for people wanting a sustainable career.

Cardella asserts in his letter that Iowans are lazy and would rather collect unemployment than work at his company. Iowans are not lazy.

Cardella states that his company attempts “to set up interviews for dozens of others who have applied, but never return our calls.” There is a reason the calls are not returned and it likely has to do with the reputation and work life of call centers rather than a desire to perpetuate receiving unemployment.

Cardella suggests he would like a Nebraska-like system where his company could report people who turn down jobs or refuse to interview. Iowans understand the work and career opportunities of a call center, and are likely biding their time to find work that is more sustainable than a call center that can be easily relocated to another state or country. The author believes they would do this whether or not they receive unemployment compensation because that is more characteristic of Iowans.

Blog for Iowa wishes Thomas L. Cardella and Associates well, as we do most companies that provide jobs to Iowans. However, Cardella’s lashing out at Iowans as lazy and disingenuous seems unwarranted and a poor reflection on other entrepreneurs. Or maybe, media attention to the interests of Tom Cardella and people like him is just one more example of life in the post-Reagan era made more obvious by the ascendancy of Republicans in the 2010 midterms.

~Paul Deaton is a native Iowan living in rural Johnson County and weekend editor of Blog for Iowa. E-mail Paul Deaton.

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2 Responses to Entrepreneurs and Iowa Employment Tax

  1. Anonymous says:

    While I can't agree that all Iowans are lazy, I do think Mr. Cardella has a point. As an Iowa employer in retail, I often have people walk in not professionally dressed, rudely demand an application, and walk out without asking with whom they should follow up. These people CLEARLY do not care about me hiring them, and they ARE a waste of my time. It would be nice to have a vehicle to report these time wasters, as they do not support, in fact are a detriment, to business in Iowa.

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  2. Anonymous says:

    Thanks for reading Blog for Iowa.
    During my business career I interviewed more than 10,000 candidates for employment during a 5 year period and agree there are a lot of time wasters out there. My first rule of thumb was that if an applicant showed up without socks, the interview was over.
    While we may feel good reporting a miscreant, how much additional time would we want to spend on time wasters. While zapping them with a report that cuts off their unemployment compensation might feel good in the moment, do employers really want another government procedure to follow unless it contributes to their bottom line?
    Employee turnover always has a cost, and in higher turnover professions like retail, call centers or truck driving, the cost of hiring and replacing employees is substantial. The business model for these types of operation does not support paying wages that will retain employees long term. I am not sure of the solution, other than hiring all family members, and that doesn't work for larger businesses.
    Thanks again for your comment.
    Regards, Paul

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