Corbett pushes for Iowa tax reform

Rod Boshart, Gazette Des Moines Bureau

URBANDALE - Cedar Rapids Mayor Ron Corbett, a possible GOP gubernatorial candidate in 2018, said Wednesday Iowa needs bold action to reform and cut the state's income tax rates to boost its economy and competitive position.

Corbett, 56, who has announced he will not run for a third mayoral term in Cedar Rapids, told members of the Westside Conservative Club he was disappointed the GOP-run Legislature did not pass an income tax revamp during the 2017 session and actually raised some Iowans' tax burden by not 'coupling” with federal tax changes, given Iowa is one of the few states that allow taxpayers to deduct their federal tax liability from their state taxes.

'I hope they do it,” Corbett said in discussing tax reform. 'I was disappointed, frankly, that they didn't do it this year.”

In response to a question, Corbett said he favored the elimination of federal deductibility immediately and using the proceeds to dramatically lower Iowa's income tax rates, which are divided into nine brackets with the top rate an uncompetitive 8.98 percent - which effectively becomes about 6 percent when federal deductibility is taken into account, but does not show up that way in national comparisons.

Leaders of the new GOP legislative majority had included income-tax changes among their 2017 priorities, but mounting budget woes and uncertainty over possible federal tax policy changes forced postponement of their plans to make reforms, reductions and revisions.

Gov. Kim Reynolds called tax reform her first priority Wednesday in her first address as governor after taking the oath of office to replace Terry Branstad, who resigned to become U.S. ambassador to China.

Senate Republicans say they are poised next year to offer changes to shrink state income brackets from nine to three, gradually phase out federal deductibility to cut rates and provide at least $500 million in relief to Iowa taxpayers by 2022. The changes would lower Iowa's top rate from 8.98 percent to 5.65 percent.

'My challenge is for them to be as bold as they possibly can and not be milquetoast and make some small tweaks. We are a slow-growing state,” Corbett said, noting some areas of Iowa are experiencing growth and prosperity but it's not statewide and current tax rates are hurting the economy.

Corbett - who founded the conservative Engage Iowa think tank focused on the environment, economy and education - said lawmakers and Reynolds should eliminate as many deductions 'as are politically feasible” to flatten rates to about 3 percent at the top end, to enhance Iowa's position as a low-rate state.

'We advocate getting rid of federal deductibility and lowering those tax rates,” Corbett said, 'not phase it out over a five-year period. If we're trying to generate growth from changing our tax code, phasing it - what do you want to phase in your growth? - no, you want growth and you want it immediately.”

Corbett said normally the administration sets the tone for what issues are going to be discussed, 'and that tone wasn't set at the beginning of the session for income tax modernization” by the Branstad-Reynolds administration. 'We actually took a step back by not coupling. That was a big mistake by not coupling.”

Corbett, who was speaker of the Iowa House in 1997 when the Legislature cut state income tax rates by 10 percent, said the Legislature when it was under split-control in 2016 agreed to 'couple” with the federal tax code to help farmers, teachers and others who benefit from the adjustment and he believed it should have been part of the Branstad-Reynolds administration's 2017 legislative priorities.

'The Legislature was backed into a corner,” he said.

'To have farmers, of all people, losing their accelerated depreciation when we have a challenge in the farm economy, to take that away from them is ridiculous,” he said. He noted the justification was that the budget was tight and the state couldn't afford it.

'Well, that doesn't sound like a conservative point of view. Normally, the conservatives would say ‘well how can the taxpayer afford this?' So the farmers can afford it? The teachers can afford it? I think that was a big mistake.”

Corbett, who has said he is considering a gubernatorial bid in 2018 which could set up a GOP primary with Reynolds, was asked about the executive changes taking place in Iowa. 'There's speculation that I'm running and I've been fueling that speculation,” he said, eliciting laughter from the crowd.

The Cedar Rapids mayor noted that in 2014, Democrat Bruce Braley was unopposed in his bid to replace Tom Harkin in the U.S. Senate, while Republicans had a competitive primary that eventually was won by little-known state senator Joni Ernst of Red Oak.

'She came out of that primary like a rocket,” Corbett said. 'That primary was healthy for the party. It sharpened each one of the candidates. It made them better, it made their message better, it organized them, and today we call her Sen. Joni Ernst. Bruce Braley - flat footed,” he added, now practices law in Colorado.

'Why would Republicans want to model effort of four years ago? So, if I do decide to run, it will be a primary and I think it will be healthy for the party,” he said.

l Comments: (515) 243-7220; rod.boshart@thegazette.com