Lawmakers should dig into Iowa's tax giveaways
The numbers don’t lie. Iowa lawmakers will face a budget shortfall when they return to the Statehouse next month.
The Revenue Estimating Conference, a panel charged with setting the tax revenue estimates lawmakers and the governor use to build state budgets, has downgraded its estimate for tax collections in the current budget year by $100 million. The REC also sliced more than $50 million from its estimate for the next fiscal year, starting July 1.
That means the spending plan approved last spring will run into the red unless the Legislature finds $100 million in savings. Within a $7.2 billion budget, it represents a manageable but serious challenge.
What’s more troubling than the shortfall are the circumstances. Iowa’s economy is healthy and growing. Farm income has taken a hit from low commodity prices, but other economic fundamentals are strong. Tax collections are growing, though at a slower rate than expected.
Normally, these aren’t the sort of ingredients that yield budget problems. And yet, lawmakers soon will be sifting through the budget, looking for functions and services to cut. Republicans who will control the Legislature and Gov. Terry Branstad have pledged to shield K-12 education from cuts. That’s good news, but still leaves human services, public safety, state universities, public health and other functions in line for possible reductions.
Spending always should be scrutinized. But it seems there’s too little scrutiny aimed at the lengthy list of the tax reductions, carve outs and credits lawmakers have handed out over the years, each sapping available revenues.
The biggest, of course, is the bipartisan 2013 commercial property tax reduction package that promised to backfill lost revenues to local governments. Those backfill dollars now are gobbling up a growing share of available revenues, dollars that might otherwise be available for schools and other needs.
But the property tax package is hardly the only issue. Over the years, lawmakers from both parties have given away tax exemptions, deductions and credits to an array of special interests lobbying for a break. Individually, the cuts look small. Added together, they have a significant budgetary impact.
They’re sold as an economic boost, but there’s rarely any follow up to find out if the tax cuts actually delivered on those promises.
If lawmakers want to temporarily patch a budget hole, they can focus only on spending. If they want to get at the issue of revenues falling short of needs, even in good economic times, they’ll dig into the tangle of tax cuts bestowed by so many lawmakers too eager to play Santa.
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