Pressure’s on Iowa’s new GOP majority to produce tax relief
BY ROD BOSHART
Gazette Des Moines Bureau
DES MOINES – Hull Sen. Randy Feenstra is living the dream as a Republican legislator tasked with reforming, rewriting and reducing Iowa’s income taxes.
Feenstra, 47, enters his third term in the Iowa Senate next month as the newly named chairman of the Senate’s tax-writing Ways and Means Committee and part of a GOP majority that controls the Iowa Senate for the first time in a decade along with a Republican-led Iowa House and GOP governor.
Expectations are running high that the first GOP trifecta at the Statehouse since 1997 will produce significant changes to the state’s complicated income tax code beyond the 10 percent across-the-board cut they engineered the last time they were at the controls of state government.
“There is absolutely a lot of pressure,” said Feenstra, during a recent interview at the Statehouse, where he has been busy pouring over test runs and analyzing data with the nonpartisan Legislative Service Agency of various changes to Iowa’s income tax code and the impacts each would have for taxpayers. He also has been meeting with stakeholder groups to get their input and studying how tax and spending decisions have to “go hand in hand” to avoid unforeseen or unintended consequences.
GOP leaders have made it clear that tax reform is at the top of their two-year agenda, but Feenstra said the task has been complicated by slumping revenue that will require short-term budget fixes and the complexities of Iowa’s tax tangle of credits, deductions, penalties and rate structures.
Currently, Iowa’s personal income tax system has rates in nine brackets that range from 0.36 percent up to 8.98 percent, but state officials argue the top effective rate is closer to 6 percent when you factor in the effects of Iowa being one of only a handful of states that allow taxpayers to deduct their federal liability from their state tax.
“It is time that we do some type of reform in the system that is the most complicated system in the nation. My goal is to streamline and then see once how that plays out with revenues and so forth,” he said. “It’s not as simple as just saying, hey, we’re going to do one rate or two rates or whatever it might be. There is a lot of stuff.”
Feenstra has looked at past studies of Iowa’s tax code as well as changes other states have made to analyze how they worked or didn’t produce their hoped-for results.
“I think all things are on the table right now,” he said. “I’m looking at a myriad of designs. There are a lot of states that have pieces that I like and I want to see once how that fits in but in doing that you also have to do your runs so you don’t whimsically say this is a good idea and yet the data shows that some taxpayers are going to pay a lot more.
“Right now we’re like little test tubes, we’re testing many, many different scenarios and what is the best thing for Iowa in the individual income tax, corporate income tax and even then the smaller stakeholders that have the different credits and deductions and so forth,” he added.
During public forums in advance of the 87th General Assembly convening Jan. 9, GOP leaders had made clear they expect the new Republican legislative majority will push a major reform to simplify and reduce state income taxes.
Sen. Jack Whitver, R-Ankeny, who will be installed as the new Senate president, told a Des Moines business forum that tax reform will be a top priority, along with balancing, streamlining the state budget and improving Iowa’s water quality as legislators focus on jobs, growth and reform.
“I believe one of the messages from this campaign is that Iowans feel that they are over taxed,” Whitver said. “We will have a bill to address individual income tax this year. I believe we’re going to have a situation where we can have a win-win where we can put more money in the pocket of hard-working Iowans while also growing our state. We’ll have that bill. What it will look like we don’t know yet. We’re still working on the details.”
Feenstra is among the players who will decide what that reform looks like.
“It’s got to be very reasonable. It’s got to be that it benefits Iowa, not hurts Iowa. It’s got to be data-driven, it’s got to be factually-driven and we can do that, but it takes a lot of time and there are a lot of moving parts,” he said. It might also be a multi-year project, he added.
“As much as I’d like to do it in one year, we might have to do some things over a two-year period and maybe show what’s behind the curtain in the first year and say this is what we’re looking at doing,” Feenstra noted.