Iowa tax credit changes approved on party line vote

DES MOINES - Even as the House Appropriations Committee worked its way through spending plans for the coming fiscal year, it approved legislation that would redirect $163 million in tax credits to a taxpayer trust fund without defining how it will be used.

Chairman Pat Grassley, R-New Hartford, indicated his preference for 'broad-based tax reform” that would lower taxes on Iowans and businesses.

He acknowledged Democrats have a different philosophy, preferring to direct at least some of those funds to underfunded programs.

'In a year when we have a deficit of $131 million, we need to improve the balance sheet,” Rep. Chris Hall, D-Sioux City, said. 'This does nothing to improve the balance sheet” and siphons off dollars to a fund that may or may not be used for tax relief.

Grassley acknowledged that overhauling the state's tax credit system - which includes $427 million in credits for everything from adoption to wind energy - has been a formidable challenge.

'It's maddening. Every time I ask a question, I get three answers telling me why I can't do it,” he said.

That's because business interests and others who use the tax credits are concerned about how it will affect their taxes. No lobbyist has registered in favor of House Study Bill 187.

Hall offered a 10-point plan to address tax credits that 'helped create the budget mess” the Legislature has been struggling with this year.

Unlike the GOP plan, his would create $53 million in savings in the fiscal 2018 budget, Hall said. His focus is protecting credits that benefit working families, as well as new and developing industries such as renewable energy.

Like Grassley's approach, he would cap some credits, such as the Research Activities Tax Credit and the Historic Preservation Tax Credit.

Hall's plan also called for raising the minimum wage to $10.75 an hour.

After explaining his amendment to Grassley's proposal, Hall withdrew it, but had it included in the committee's minutes.

Grassley amended his own bill. Rather than an overall cap on tax credits, he proposed capping several individual credits and reducing what's available through other credits.

He also proposed redirecting money from tax credits to a taxpayer trust fund. He would start with $7 million, then $33 million next year until $163 million is deposited over the next four years.

That didn't meet Democrats' transparency and accountability standards.

'I really want to be there with you,” said Rep. Kirsten Running-Marquardt, D-Cedar Rapids, 'but it does look like a bit of a slush fund.”

Grassley expressed frustration that although both parties talk about doing something about tax credits, 'it sounds like it will pass in a partisan matter.”

It did. On a party-line vote.

Legislative leaders have indicated the tax credit bill could be part of a larger tax reform effort next year.

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