DES MOINES — Legislative leaders are exchanging ideas regarding tax law changes that would yield $96 million in relief for certain Iowans. But the changes also would mean that much less money in the state’s coffers during a tight budget year.
The state must decide whether to couple with recent changes in federal tax laws. What’s at stake:
If the state couples for tax year 2015, some Iowans who bought supplies or equipment for business use will receive $96 million in tax relief. It also means $96 million would not be collected for the state’s general fund, the pie that feeds the state’s $7 billion-plus budget.
If the state does not couple, that tax revenue is collected and the state budget gets $96 million healthier, but Iowans face an unexpected tax expense.
Leaders from both political parties are exchanging proposals as a deadline approaches: Farmers must file taxes by March 1.
Republicans have pushed for coupling to provide tax relief. Democrats have been hesitant to embrace an idea that the fear would result in less money for public schools.
Democratic Senate Majority Leader Mike Gronstal said Monday he would support coupling if legislators can make the revenue balance.
“I’ve made a good-faith offer to the Republicans that we felt provides some countervailing revenue measures. So, we’re open to considering it,” Gronstal said. “I would rather do the coupling than some of the other things that are on the table.”
House Republican leaders held a news conference Monday at the Capitol with Iowa farmers, a teacher and a tax professional all advocating for coupling.
Farmers said they would be hit with an unexpected tax bill on recent equipment purchases, and the teacher told a similar story about buying classroom supplies.
“I’m sure I’m not the only farm family example. It’s definitely hitting home for me,” said Laura Cunningham, a grain farmer from Nora Springs.
Cunningham said that without coupling, she would pay an extra $62,000 in taxes on a new grain bin.
Wendy Garton, a first-grade teacher from Bondurant, said she uses the tax rule in question to lessen the cost of supplies she buys.
“We need the tools, and we need to be able to support ourselves and our students,” Garton said. “The only individuals being hurt by this are the students.”
Gov. Terry Branstad on Monday expressed his support for Republican-supported legislation on coupling. Previously, Branstad included in his budget plan partial coupling that would not have included relief for business purchases.
“The governor supports (the Republican legislation) given we can still fund the budget priorities of Iowans. Those priorities were clearly laid out in the budget the governor proposed: on-going education funding, fully funding the property tax and teacher leadership commitments, and not underfunding Medicaid,” Ben Hammes, the governor’s spokesman, said in an emailed statement. “The governor believes this is possible.”