DES MOINES — State taxpayers, farmers and business owners would receive tax relief under a policy approved Tuesday by state lawmakers in both chambers of the Iowa Legislature.
The proposal, which is the result of recent negotiations between Statehouse leaders from both political parties, needs the governor’s signature to become law.
Sen. Rob Hogg, D-Cedar Rapids, hailed the legislation as “a bipartisan compromise that is fiscally responsible.” Rep. Matt Windschitl, R-Missouri Valley, called it “the art of the compromise, or the art of the possible.”
The legislation addresses two key tax policy issues that lawmakers have been wrestling with:
• The state would couple with federal tax policy for calendar year 2015, resulting in roughly $98 million in tax relief on purchases of certain business supplies.
• The state would write into law a scaled-back version of the manufacturing sales tax relief enacted through rules changes by Gov. Terry Branstad. That relief would apply to purchases of certain manufacturing products.
“That’s good tax policy,” House Speaker Linda Upmeyer, R-Clear Lake, said of the compromise bill that was approved by all 50 senators and passed the House, 78-17.
Branstad’s spokesman said the governor is pleased lawmakers reached consensus on the tax issues, but he is disappointed the agreement rolls back his proposal on the manufacturing sales tax breaks.
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“As the chief executive, it is the governor’s job to look at how this bill fits into the bigger budget picture and how it will impact jobs and Iowa taxpayers, and he will review it accordingly,” Branstad spokesman Ben Hammes said in an emailed statement.
According to the state’s non-partisan fiscal estimating agency, the coupling provision would draw $98 million from unspent money state for fiscal 2016, which ends June 30.
The entire package, according to the fiscal agency, will result in additional state revenue in future years, in the range of $20 million to $30 million annually. But those figures do not factor in potential tax coupling in future years, which likely would drop those figures to revenue reductions.
“Don’t count on us coupling for 2016,” Hogg warned Iowa taxpayers.
Sen. Randy Feenstra, R-Hull, introduced but immediately withdrew an amendment that would have made tax coupling permanent. Feenstra said he was told Democrats would not accept the amendment and that it threatened the deal.
“At the end of the day, getting coupling done for this year was most important,” Feenstra said.
Bill praised, criticized
Praise for the legislation’s approval came from Agriculture Secretary Bill Northey, the Iowa Corn Growers Association, Iowans for Tax Relief and the conservative issue advocacy group Priorities for Iowa, which is run by a former Branstad spokesman.
“This is a very important agreement that will benefit Iowa farmers and business owners that had made an investment in their business and as a result were facing a significant increase in their state taxes,” Northey said in a statement.
The liberal advocacy group Progress Iowa joined some Statehouse Democrats who expressed budgetary concerns, particularly over school funding.
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“Resources are too scarce for public schools or to provide Medicaid oversight, but tax cuts always seem to fit the budget,” Progress Iowa Executive Director Matt Sinovic said in an emailed statement. “Now that the Legislature has taken care of big business, it’s time to get to work for our children, schools, and for access to health care.”
If approved by the governor, the tax policy bill would clear significant obstacles to lawmakers’ work on the state budget for the fiscal year that starts July 1.
While the tax issues were unresolved, lawmakers were uncertain how much funding would be available for upcoming budget negotiations. If approved, the tax policy compromise allows lawmakers to turn their focus to the budget and agree to spending targets.