Property tax issue in legislative limbo

Senators voted 50-0 to give Iowa small businesses a tax break

DES MOINES – Hopes for bipartisan resolution of a nagging property tax relief issue during the 2013 session remained in legislative limbo on Monday.

A commercial property tax plan passed by the Iowa Senate and then significantly revised and expanded by the Iowa House last week is now perched on the Senate debate calendar, but it is uncertain whether majority Democrats will move the bill as currently configured to a House-Senate conference committee for negotiations.

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said Monday the changes made by the GOP-led House to revamp the approach for easing commercial property taxes and add an income-tax reduction component has jeopardized the future of Senate File 295 in what are supposed to be the closing weeks of the 2013 session.

As passed by the House, Gronstal said the cost of the tax relief plan has ballooned to about $1.1 billion in contrast to the tax credit approach Senate Democrats approved to provide $250 million in reduced property taxes once the proposal was fully implemented in five years.

“In some respects, I’m not sure we see it anything more than a political document, so we have reservations about that,” said Gronstal, after adjourning the Senate on Monday without calling up Senate File 295 for consideration. “I’m not sure it’s a serious effort because it puts us in deficit in the second year. That sounds more like a political document than an effort at legislation.”

Gronstal’s comments came a few hours after Gov. Terry Branstad – back on the job after last week’s trade mission to China – expressed optimism that the tax policy issue would go to conference committee and reach resolution.

“Whenever we get a major piece of legislation into conference, generally we’re able to reach an agreement and get it worked out,” Branstad told reporters.

“I am interested in getting bold action on property tax relief and I’m willing to consider different ideas that legislators of both houses and both parties have,” the GOP governor added. “But the most important thing is that we make Iowa more competitive, that we reduce the impediments to business growth and creating jobs in our state. This is something that I think is critically important.”

However, Gronstal said he believed that once the governor analyzes the House-passed plan, he will realize that it wouldn’t fit within Branstad five-year projections that form the basis of his budget positions.

“From my perspective being in deficit two years from now is a bad place for the state to go,” said Gronstal, who planned to have further talks with House GOP leaders about the future course of the session’s tax policy priority.

During Monday’s Senate floor action, senators voted 50-0 to give Iowa small businesses a tax break for covering part of their employees’ health insurance costs.

Senate File 447 would extend a state tax break to small businesses with fewer than 25 employees that already receive a federal tax break for helping cover their workers’ health-care costs.

Sen. Matt McCoy, D-Des Moines, the bill’s floor manager, estimated that more than 73,000 businesses could benefit from the legislation – which would cost the state about $5.5 million in reduced revenue next fiscal year if the Iowa House and Gov. Terry Branstad sign off on the measure, according to a fiscal analysis by the Legislative Services Agency.

“This tax credit is one step in an effort to bring down health care costs and make coverage affordable for all small businesses,” McCoy said.

Under the Affordable Care Act, a small business that employs up to 24 workers and chooses to cover 50 percent of their employees’ health insurance costs get a federal income tax credit. McCoy said S.F. 449 would provide another 25 percent refundable state tax credit.Sen. Jake Chapman, R-Adel, supported the measure but used the debate to take a swipe a federal health-care reform saying the tax credit shouldn’t be necessary but is the Affordable Care Act “is not affordable at all.”

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