Mt Pleasant News
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Neighbors Growing Together | Aug 22, 2014

Legislature studying flat income tax for Iowans

Feb 25, 2013
Photo by: Brooks Taylor State Rep. Dave Heaton, R-Mt. Pleasant, makes a point at the Feb. 23 legislative briefing as State Rep. Tom Sands, R-Columbus Junction, center, and State Sen. Rich Taylor, D-Mt. Pleasant, look on.

By BROOKS TAYLOR

Mt. Pleasant News

Flat tax in Iowa?

There is some movement in the Iowa Legislature toward a flat income tax option, but don’t expect such a measure to be passed this year, Tom Sands, R-Columbus Junction, chair of the House Ways and Means Committee, told those attending Saturday’s legislative briefing at IWC College.

Sands said an option allowing Iowans to file their income tax either under the current formula or a 4.5-percent flat tax (no credits or deductions) is being debated.

“There would be absolutely no losers under the bill because you could file either under the current system or through the flat tax,” Sands said. He said that the state would have a revenue loss of $400-$440 million if the flat tax became an option.

The 11-year legislator said he would be introducing a similar flat-tax bill for corporate tax filers.

“Obviously, they could raise the rate (4.5 percent), but they would be losing the effect they are trying to create,” Sands continued. “I am pretty sure the bill won’t become law this year because new bills need a few years.”

Saturday’s briefing, sponsored by the Mt. Pleasant Area Chamber Alliance’s Legislative Affairs Committee, centered on taxation with most discussion on property taxes.

State Rep. Dave Heaton, R-Mt. Pleasant, said Gov. Terry Branstad wants a 20-percent reduction of commercial and industrial taxation over the next four years. That is a 50-percent cut from the 40 percent the governor sought last year.

City and county governments were vocal in their opposition to such a bill last year. Mt. Pleasant and Henry County would lose a significant amount of revenue. Mt. Pleasant receives the second largest amount of commercial tax per capita in the state.

The state is proposing replacing the lost revenue but that has legislators nervous.

State Sen. Rich Taylor, D-Mt. Pleasant, said the senate is debating commercial property tax relief, which would give commercial property owners a tax credit instead of a tax cut. “That wouldn’t put as much a burden on cities and counties,” Taylor explained. “I am worried about the state saying they are going to back-fill something. The state is good at saying they are going to do something and then not doing it.”

The commercial tax credit, Taylor added, would be on commercial property value up to $325,000 valuation. “That would help Main Street,” he continued. “We want to do what we can do to keep small business going and it is affordable.”

Sands said it is time for action on property tax relief.

“This (commercial property tax relief) has been studied to death and now it is time to do something,” he began. “You have people wanting to lower taxes. The governor’s proposal (on commercial property tax relief) protects cities and counties about as good as possible with back-fill. It is a standing appropriation (replacing lost commercial tax revenue for cities and counties) and it would take a future legislature to stop the appropriation.

“The senate property tax bill is only good if funded,” Sands continued. “There are all kinds of different options. Property taxes are very complicated. I am not sure anything has changed enough to get anything passed this year.”

While saying he is “all for tax relief,” Heaton questioned where the money will come from to fund state programs.

“I have some major concerns on how this all will end up,” Heaton commented. “How are we going to accomplish this — $190 million for education redesign, $400 million in lost tax revenue and $100 million in additional salaries? How does government still proceed and deliver services in a meaningful way? I lost 28 mental-health beds because we (state) couldn’t do a salary bill the last few years.

“My position has always been for tax relief and education reform, but you have to get government back to the service level before all the cuts,” Heaton added. “When we are providing tax relief and school reform, we have to keep in mind that we can’t reduce the services we provide. I want an efficient, effective government.”

Taylor contended that commercial property tax relief would make Iowa more business friendly, but the state has to keep its promise. “If we cut (commercial) tax value by 20 percent and pull the rug out, tax revenue to cities and counties will be 20 percent less. The thing I like about having it as a credit is that cities and counties are still getting their money. If we abolish it (tax credit), it won’t bankrupt cities and counties. Maybe we can come up with a hybrid (compromise).”

In other legislative news, Heaton said the House is beginning discussions on expanding Medicaid to 138 percent of the poverty level. “It is not a done deal,” Heaton noted. “The governor will be making public this week his alternative to Medicaid expansion.”

The representative also said that the House is moving counties to the starting line for mental-health redesign in 2014.

The human resources committee, Heaton said, will be passing an early childhood bill this year, requiring an audit every three years instead of two. “The audit costs $7,500 which is too much every two years.”

Freshman legislator Taylor said that his first six weeks in the senate have been very exciting. “Things happen very fast. There are so many things that happen behind the scene that people don’t know about. There are 50 or more bills ready to go to the floor. The thing I have learned is that everybody seems to care what is happening in our state and to our state.”

Henry County Health Center Trustee Jan Towne moderated the briefing. The next briefing will be at 8:30 a.m. Saturday, March 23, in the Chadwick Library’s International Room.

 

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