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Iowa legislators move forward with compromise on taxes

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DES MOINES — Leaders of the split-control Legislature on Wednesday were negotiating the framework of an initial budget deal that could resolve tax policy and school funding issues that are major sticking points holding up progress on this year’s session work.

Sen. Joe Bolkcom, D-Iowa City, chairman of the Senate Ways and Means Committee, said the tax-policy compromise (Senate Study Bill 3171) called for adopting a measure passed by the Iowa House to fully couple federal income tax changes to the state tax code retroactive to the 2015 tax year and adopt a scaled-back version of state sales tax breaks on consumable supplies used in the manufacturing process.

The coupling piece would provide up to $95 million in tax relief while the manufacturing sales tax changes would total “in the neighborhood of $25 million,” Bolkcom said. Legislative action on a tax package could begin as early as Thursday, he added.

“We’re ready to move ahead with those three elements: the coupling, rescinding the governor’s rules and picking up the consumable supplies bill that the House passed in 2014. That would be in one package,” Bolkcom said.

Republicans who control the Iowa House and Democrats who hold a majority in the Iowa Senate also were working to resolve a dispute over state funding for schools with negotiators looking at a deal that could boost state aid in fiscal 2017 by 2.25 percent and provide other categorical increases that would bring the overall funding growth closer to 2.5 percent, according to legislators close to the talks.

“There’s no deal yet, but we are meeting with House Republicans on the big issues,” said Sen. Bob Dvorsky, D-Coralville, chairman of the Senate Appropriations Committee, who declined to discuss specific numbers. “The good news is we are meeting and talking.”

Rep. Art Staed, D-Cedar Rapids, posted a note on his Facebook page stating: “I just heard that a compromise is being considered for school funding: 2.5% SSA (supplemental state aid to schools), income tax coupling, a reduction in the state sales tax exemption on manufactured products and some additional funding for the summer reading programs. But, the governor may be an obstacle to an agreement again.”

Senate Majority Leader Mike Gronstal, D-Council Bluffs, quickly quashed speculation related to the school aid discussions, saying the issue is not finalized.

“I don’t think we’ve made those judgments yet,” Gronstal said in an interview. “I’m aware some people that have no reason to know have put stuff out in the world out there. I can tell you with certitude that the speaker and I have not finalized numbers.”

Gronstal said he expected legislative leaders would make an announcement Thursday “relative to what we believe is an agreement in principle between the House and the Senate on the revenue side and from there it will not take us very long” to resolve the education spending issues and develop the “end targets” for state spending in fiscal 2017.

Gronstal said lawmakers are considering language changes to the tax-policy bill requested by Gov. Terry Branstad, but they would not affect the overall tax relief numbers.

Branstad spokesman Ben Hammes acknowledged that “ongoing conversations” were taking place but declined to comment further.

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