DES MOINES — Statehouse Republicans on Thursday said they want to make sure that any revenue windfall Iowa reaps from federal tax changes goes to taxpayers rather than growing state government or launching new spending initiatives.
Gov. Kim Reynolds and the GOP-run Legislature are expected to get an initial report Friday on the potential impact of federal tax cuts and how they might translate into state income tax collections for Iowans who will have less federal tax liability to claim, given Iowa is only one of three states with a federal deductibility feature in its tax code.
“It isn’t just a lottery ticket, that you won the lottery type of deal,” said Rep. Pat Grassley, R-New Hartford, chairman of the House Appropriations Committee, in urging a cautious approach to how state officials address tax and spending cuts when lawmakers gavel in their 2018 session Monday.
The state Revenue Estimating Conference scheduled a special meeting for Friday afternoon to be briefed by officials in the Iowa Department of Revenue concerning the fiscal impact of a major overhaul of the federal corporate and individual income tax system passed by Congress and signed by President Donald Trump.
Reynolds and top GOP lawmakers say they will use the findings in fashioning a state plan to provide tax relief, reform and simplification during the 2018 session.
Republicans return to the Capitol with majorities of 29-20-1 in the Iowa Senate and 58-41, pending a special election Jan. 16 to fill a vacancy in House District 6.
“We’re not viewing the (federal) tax reform as a way to get more dollars out of those middle-class Iowans,” House Speaker Linda Upmeyer, R-Clear Lake, said during a legislative forum sponsored by the Associated Press.
“Those were dollars that were intended to be in people’s pockets. We need to see that that happens,” Upmeyer told reporters. “We’re not going to view that as an opportunity to grow government and spend that money.”
Reynolds, who indicated she would spell out guidelines on how Iowa should modernize its tax code when she delivers her first Condition of the State address Tuesday, said tax changes and reductions should be fiscally responsible and sustainable.
“We want to do everything we can to streamline the process, to make it simpler, to reduce taxes and really to help families to keep more of their hard-earned money,” said Reynolds, who became Iowa’s first female governor when former Gov. Terry Branstad resigned last May to become the U.S. ambassador to China.
House Democratic Leader Mark Smith of Marshalltown said the first order of business for legislators should be to erase a projected $37 million budget imbalance in the current fiscal year and provide more value for the money taxpayers already are investing in services they expect state government to provide.
“When we continue to only talk about budget cuts and tax cuts, that sets Iowa on the wrong course,” Senate Minority Leader Janet Petersen, D-Des Moines, said at the forum.
She said the focus should be on job growth and getting the state budget in check to avoid problems that other states, like Kansas, encounter when cutting taxes.
Senate Majority Leader Bill Dix, R-Shell Rock, said the focus has to be on holding spending in check while improving Iowa’s competitive position by lowering tax rates and simplifying the state tax code.
“Anything we do on taxes really should be done for the purposes of expanding the number of taxpayers and opportunities in our state,” Dix said. “The goal is to shine a beacon on Iowa as a place of opportunity where Iowans can enjoy higher-paying career opportunities.”
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