Iowa surplus could lead to lower state income taxes, Branstad says
Specific recommendation likely coming in January
Gov. Terry Branstad said today (Monday) that the state’s surplus financial position should put policy-makers in a position to “dramatically” reduce personal and corporate income tax rates and ease tax burdens on property owners.
The governor declined to give specifics on what tax changes are under consideration, saying he wants to see the December state revenue estimates and likely will make his recommendations to lawmakers when he unveils his two-year budget plan next January.
However, he and Lt. Gov. Kim Reynolds said the state closed the fiscal 2012 books with $260 million more revenue than was anticipated, and the growth projections through June 2014 are significantly higher. They said uncertainty over how Congress and the president will handle the federal debt crisis, and Iowa’s prolonged drought conditions cause them to be “cautious and vigilant” in assessing the state’s economic outlook.
“There are significant resources and there are those who would suggest opening the flood gates to new spending. This will not be our path and this will not be our approach,” Reynolds told a Monday news conference at the Statehouse.
Instead, Branstad said his administration plans to “put Iowa taxpayers first” in reviewing ways to return some of the state’s excess resources to those who built the surplus through their state tax payments and how best to use surplus funds to improve the competitiveness of Iowa’s tax climate.
“Our current budget situation is not a license to spend with abandon,” the governor said.
“I’m committed to ensuring that taxpayers have a seat at the table and that the decisions that are made about what to do with our surplus ensures that those who paid the bills also reap the benefits,” he added.
Branstad’s comments met with some opposition on Monday.
“Iowa’s public universities and state agencies like the Department of Natural Resources and Iowa Workforce Development are badly underfunded and our budget surplus should be spent strengthening vital public services rather than handing out even more tax breaks to big corporations,” said Hugh Espey, executive director of the Iowa Citizens for Community Improvement Action Fund.
Two years ago the governor proposed reducing the state’s top corporate rate of 12 percent by half, and Republicans who control the Iowa House pushed for a 20 percent across-the-board personal income tax cut. Republicans also supported reducing commercial property taxes by 5 percent annually over eight years to lower the rate to 60 percent, and to cap growth in tax rates for agricultural and residential property owners at 2 percent annually.
Branstad indicated Monday that he is considering similar ways to reduce and control property taxes to make Iowa more competitive to attract businesses and the jobs that they create.Last week, the three-member Revenue Estimating Conference said Iowa’s economy outperformed expectations for fiscal 2012 and that trend has continued into the first quarter of the current fiscal year, prompting the panel to boost the growth estimate for fiscal 2013 by $171.4 million over last year’s $6.311 billion total. REC members expected receipts to grow by 3.7 percent in fiscal 2014 – a $241.1 million increase that brought the overall projected growth in state tax collections through June 2014 to $412.5 million over last fiscal year.