Mulling tax cuts at the Iowa Capitol

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Iowa Gov. Kim Reynolds said this week she hopes there will be room for income tax cuts in next year’s state budget blueprint. But it may depend on what Congress does on tax reform.

So the leader of a state that’s endured a series of painful budget reductions and deepening dips into reserve funds to offset sluggish tax revenues is talking about more tax cuts. And we’re taking our lead from Congress, a barely functioning legislative body, now intent on passing a $1.5 trillion goody bag of cuts paid for with gimmicks wrapped in shameless spin.

These are fiscal conservatives, folks.

To be fair, Iowa’s income taxes would be affected by whatever Congress eventually passes. Thanks to provisions such as federal deductibility, allowing Iowans to deduct federal taxes from what they owe the state, our codes are intertwined.

But Congress hardly is the only obstacle to cutting state taxes. If revenue estimators meeting in December slice Iowa tax collection forecasts yet again, the first thing facing majority Republicans when they return in January are more midyear budget cuts. Hardly a great argument for reducing revenues even more.

There’s the ongoing mystery of how much Iowa’s privatized Medicaid will cost, beyond the human cost it’s already exacted on sick Iowans. Rising health care premiums for thousands of Iowans will rise more if congressional Republicans repeal the Obamacare insurance mandate. How long can we wait for someone else to fix this? There also are the small matters of funding schools, human services, clean water, etc.

Republicans might decide to make room for tax cuts by cutting backfill dollars promised to local governments to offset commercial property tax cuts. But the resulting cuts in local services and residential property tax increases could prompt a backlash.

It’s mid-November, which is about the time you might begin testing and selling a tax reform plan to Iowans. Maybe there truly is no plan due to all the uncertainty. Maybe they do realize the budget won’t bear tax cuts.

Or maybe, like Medicaid privatization, closing mental health facilities, and gutting collective bargaining, GOP leaders plan to surprise us with a plan being crafted behind closed doors.

There may be gimmicks, such as passing tax cuts now that won’t take effect until some future fiscal year. A sketchy plan floated a few years ago sets up a flat income tax structure alongside existing rates, allowing Iowans to choose.

Or maybe there will be some serious tax proposals, such as raising the sales tax to both offset income tax reductions and, at long last, fill the Iowa Natural Resources and Outdoor Recreation Trust Fund, empty for seven years. Iowa’s water isn’t getting any cleaner.

Lawmakers faced with sagging revenues, even in a decent economy, might conclude maybe it wasn’t so wise to hand out billions of dollars in cuts, credits, breaks and exemptions over the past 20 years.

Truth is, Iowa might be able to give us a tax cut in 2018, if our leaders hadn’t already rewarded folks with better lobbyists.

• Comments: (319) 398-8262; todd.dorman@thegazette.com

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