Government

Hubbell critical of GOP tax cuts, but wants to keep sales tax expansion

Democratic nominee for Governor Fred Hubbell talks during his election night party at The River Center in Des Moines on Tuesday, Jun. 5, 2018. (Stephen Mally/The Gazette)
Democratic nominee for Governor Fred Hubbell talks during his election night party at The River Center in Des Moines on Tuesday, Jun. 5, 2018. (Stephen Mally/The Gazette)
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JOHNSTON — Democratic candidate for governor Fred Hubbell would have vetoed the “fiscally irresponsible” tax cuts the Iowa Legislature approved this spring, but he likes some of the changes.

Hubbell favors the “Main Street fairness” part of the bill that expands the state sales tax, despite his party’s repeated criticism of Republican Gov. Kim Reynolds for signing legislation they say will burden Iowa families.

Hubbell, who won the Democratic nomination for governor Tuesday with 55 percent of the primary election votes, said it’s the wrong time to be cutting taxes because the outlook for state revenues is “grim.”

President Donald Trump’s policies, Hubbell said during taping of Iowa Public Television’s “Iowa Press,” will increase tariffs on livestock from $400 million to $560 million, and trade policies could hurt markets for steel, aluminum, corn and, perhaps, ethanol.

“If we have a billion dollars of hits to our farm economy, that’s going to be hundreds of millions of dollars of hits to our state revenue, and our state isn’t going to be able to afford that,” Hubbell said.

In that case, the state will be hard-pressed to repay money borrowed from the rainy day fund and maintain adequate funding for state priorities like health, education and infrastructure.

“If today’s world is what you’re going to have in January, we’re going to have to peel back all those tax cuts because our state is not going to be able to afford that,” Hubbell predicted.

However, he continued, “there are some things in that tax law, like getting rid of federal deductibility and leveling the playing field for Main Street businesses with internet, which I think are good, we’d like to try to keep those.”

That puts Hubbell at odds with the Iowa Democratic Party that earlier this week criticized expanding sales taxes to cover goods purchased on the internet, which Iowans owe, but pay or don’t pay on an honor system.

Changes in the new tax law also levy the sales tax on “new economy” goods and services, such as ride-sharing and music and movie streaming services.

That, according to the party, will end up “virtually decimating” any benefit from the income tax changes for Iowans making less than $60,000 a year.

Hubbell also supported a three-eighths-cent sales tax increase to fund outdoor recreation and water quality initiatives.

And Hubbell wants to end the practice of writing tax checks to large Iowa employers who have no tax liability. Companies, including Rockwell Collins and Deere and Co., for example, received more than $46 million in tax refunds through the Research Activities Credit last year.

The tax credit was a “great idea to get businesses up and started and running,” Hubbell said.

“But these days, over time, it has morphed into a place where the large majority of all the tax credit money goes to a very few companies who don’t even pay income taxes in our state, and we write them checks for somewhere north of $40 million a year now,” Hubbell said. “Why would we write checks to companies if they’re not paying income taxes?”

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Rather than write those companies check, Hubbell said, he would give them a tax deduction if they owed taxes, “but I’m going to take those checks and invest in the future of your business, the future of our state, the future of our people by taking that money and improving our education and our job training and health care so they have better quality employees to hire in the future.”

“Iowa Press” can be seen at 7:30 p.m. Friday and noon Sunday on IPTV; 8:30 a.m. Saturday on IPTV World; and online at IPTV.org.

l Comments: (319) 398-8375; james.lynch@thegazette.com

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