Dems: GOP tax-cut plan 'fiscally irresponsible'

Analysis shows $1 billion cut to state revenues by 2023

The State Capitol building is shown in Des Moines on Tuesday, January 13, 2015. (Adam Wesley/The Gazette)
The State Capitol building is shown in Des Moines on Tuesday, January 13, 2015. (Adam Wesley/The Gazette)

DES MOINES — Legislative Democrats say a Senate GOP tax-cut plan that could see floor debate as early as Wednesday will threaten the state’s fiscal position.

Democrats who are in the minority in the Iowa Senate and Iowa House pointed Tuesday evening to a fiscal analysis prepared by the nonpartisan Legislative Services Agency that indicated the GOP tax plan unveiled last week gradually will reduce general fund revenue by more than $1.163 billion by fiscal 2023 — in a state that has an annual budget currently at $7.2 billion.

“The GOP’s tax plan is worse than advertised,” said Rep. Dave Jacoby, D-Coralville, ranking member of the House Ways & Means Committee. “It’s got $790 million in new corporate tax giveaways and another oversized tax break for millionaires while low income Iowans get little. The $1.16 billion price tag will break the state budget and leave Iowans with mountains of debt.”

According to the Legislative Services analysis, the GOP plan would reduce would reduce general fund revenues by $207.8 million in the 2019 fiscal year that begins July 1.

In the following fiscal years, the revenue impact is a $770 million reduction in fiscal 2020, $941.3 million in fiscal 2021, $1.069 billion in fiscal 2022, and a $1.163 billion overall revenue reduction in fiscal 2023.

Iowa’s individual income tax would be reduced by $979.4 million in fiscal 2023 while the corporate income tax revenue would be lowered by $267.4 million that year, according to LSA estimates.

Majority Senate Republicans say the sweeping tax-relief plan will cut individual and corporate income tax rates, reduce the number of tax brackets, expand the sales tax base by capturing more online transactions and generate offsetting growth by creating new career opportunities for an expanding workforce.


Sen. Randy Feenstra, R-Hull, chairman of the Senate Ways and Means Committee, called the plan a bold approach that simplifies Iowa’s complicated system, improves the state’s competitive position and delivers “probably the largest tax cut in history of the state of Iowa.”

Senate File 2383, called the Iowa Working Families Tax Relief Act, seeks to eliminate the federal deductibility feature in favor of cutting personal income taxes by 30 percent over a two-and-a-half year period.

Iowa’s top individual income tax rate will be lowered from 8.98 percent to 6.3 percent, and the corporate income tax rate will come down from 12 percent to 7 percent.

The number of brackets will be compressed from nine to five. Iowans earning around $45,000 a year would see an average tax cut of $1,000 annually beginning with the 2019 tax year. Iowans in the top income bracket could see a reduction of about $4,000 annually.

On the corporate side, Iowa’s four brackets will be reduced to two rates of 7 percent and 5.5 percent, providing about $240 million in relief over five years.

Sen. Pam Jochum, D-Dubuque, said the Legislative Services analysis indicates the GOP tax “is more fiscally irresponsible than many Iowans imagined,” and contrary to the claims of Senate Republicans, “their tax plan is not fair to many Iowans, it does not make Iowa more competitive with other states, and it certainly does not take into account the ongoing budget crisis.”

The Senate GOP plan follows Gov. Kim Reynolds’ rollout of her tax-reform package earlier this month.

The governor unveiled a significant tax package that seeks to cut Iowans personal income taxes by $1.7 billion over six years, revamp rates by phasing out federal deductibility and equalize sales tax collections by treating Main Street and online businesses alike.

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