Iowa House Republicans will enjoy Democratic support for their “wide-ranging” attempt at reaching a deal with Gov. Kim Reynolds and the Senate GOP on taxes — for as long as the effort lasts.
Democrats on the Ways and Means Committee unanimously supported House Study Bill 278 for no other reason than it is not the Reynolds-Senate plan.
“I’ve read that the Senate proposes to eliminate the backfill to cities and counties. The House bill doesn’t. I think that’s a good thing,” said Rep. Chuck Isenhart, D-Dubuque.
He agreed with Republican House Speaker Pat Grassley that the ramifications of “what many could consider potentially radical changes to how we deliver mental health” services included in Reynolds-Senate plan have not been fully considered.
That’s another reason why Democrats were willing to vote to move HSB 278 to the full House, Isenhart said.
Bill manager Rep. Dustin Hite, R-New Sharon, thanked him for the support “even if it is simply because it’s not the Senate bill. We’ll take an agreement when we get an agreement.”
The governor Wednesday had rolled out a plan incorporating several priorities of hers and majority Republicans as well as $400 million in state tax relief. Senate Republicans endorsed it, but House Republicans have reservations and are proposing HSB 278 as an alternative.
But the House GOP plan leaves out “really meaningful pieces,” Senate Majority Leader Jack Whitver, R-Ankeny, said. Among them is the gradual shift of funding mental-health services from local property taxes to the state’s general fund as a way to provide a more equitable system while saving $100 million for property taxpayers.
However, his counterpart, Senate Minority Leader Zach Wahls, D-Coralville, said the property tax relief in the Senate plan would be offset by ending the state aid known as “backfill” to cities and counties to help make up for local revenue they lost in a 2013 statewide property tax cut.
Whitver said he was pleased that House Republicans appear to have embraced their plan to eliminate the 2018 income tax “triggers,” which would allow state income tax cuts to occur sooner. But he said “that’s not enough.” Senate Republicans also want a quicker phase out of the state inheritance tax and don’t like the House idea of returning surplus tax collections via a credit on state income tax returns.
“We want to put the taxpayer at the table first,” Whitver said. “We want to know what we’re going to do for tax relief this year before we ever get to the budget. We’re not interested in going out and spending a couple hundred million dollars in new money on new spending without providing some sort of tax relief to Iowans. That’s what makes shutdown difficult. If we can’t solve the tax issue, the budget is going to be very lean.”
The Iowa Legislature was scheduled to end the annual session on April 30. The disagreement on state taxes, and then reaching a deal on a fiscal 2022 budget, has sent lawmakers into overtime.
There were some things in the proposals that Democrats do like, said Rep. Dave Jacoby, D-Coralville. He was happy to see Republicans finally adopt “Democratic ideals” such as ending federal deductibility, which allows Iowans to deduct their federal income tax when doing their state taxes. Republicans’ opposition to ending federal deductibility may have been the single biggest reason the GOP took control of the House in 2010, “so it’s good to see that Republicans have come full circle.”
Democrats also liked proposed changes in the tax rates, but thought they could be made fairer for Iowans who “truly” are middle class taxpayers rather than everyone with incomes of $50,000 to $300,000, Jacoby said. Democrats also liked proposals to expand access and affordability of child care as well as exempting coronavirus-related federal relief payments from taxation.
Wahls, however, shared House Democrats’ concerns about the takeover of mental health funding by the state because it could create a dependence on state revenues that decline during an economic downturn — “exactly the time when those services for mental health funding tend to increase.”