Iowa water quality funding, tax cuts popular at hearings

DES MOINES — Competing proposals to lower Iowans’ taxes received largely positive feedback during a pair of legislative hearings Tuesday night at the Iowa Capitol.

The feedback from various business groups, conservative tax policy organizations and water quality and environmental advocates was not unanimous, but certainly largely in support of Republican state legislators’ varied proposals to lower the state tax on income to a single rate; reduce the state tax on businesses; and create a shift in taxes that provides funding for the long-starved state fund for conservation and water quality projects.

Majority House and Senate Republicans held the first legislative hearings on their proposals almost simultaneously Tuesday evening at different rooms in the Capitol.

Eventually, those Republican legislative leaders and Republican Gov. Kim Reynolds will have to agree on one proposal that could contain different elements of the various plans.

“This is an opportunity that we have. … I think this is the structure to get something done. I’m not saying this bill is perfect,” said Sen. Dan Dawson, a Republican from Council Bluffs who is shepherding the Senate Republican proposal.

Most widely popular at the hearings among the plans were the water quality and conservation funding proposal and the lowering of the state’s corporate tax rates.

Advocates gushed over the water quality and conservation funding piece at the Senate hearing. The Senate’ version is the only proposal to include that provision.

“We are absolutely thrilled to have IWILL (the state’s conservation and water quality fund) part of this bill,” said Tammi Kircher, with Iowa’s chapter of Ducks Unlimited.

Dustin Miller, executive director of the Iowa Chamber Alliance, said the water quality and conservation funding will help communities attract new residents. Iowa’s population growth has been largely stagnant over the past decade.

“The thing we are most excited about is the inclusion of IWILL,” Miller said. “What we hear repeatedly is quality of life projects is what they are looking for.”

At the House hearing, environmental advocates urged Republicans there to consider addressing the trust fund.

Dan Cohen of the Buchanan County Conservation Board said investing in Iowa’s natural areas would be consistent with the goals of revitalizing rural Iowa, and Craig Patterson of the Iowa Natural Heritage Foundation also said it would improve workforce attraction and retention.

The consensus from interest groups at the House hearing was that the simplification of Iowa’s income tax code will be an advantage of the proposed flat tax — a rate that all pay.

“That’s one of the biggest issues we deal with in the economic development world because if you’re explaining, you’re losing,” the chamber’s Miller said.

Business leaders praised the Senate proposal to reduce corporate income taxes. At the House meeting, those business interests urged Republicans there to consider adding that piece.

Miller said the Chamber Alliance is undecided on the House bill because it lacks that corporate income tax reduction.

“When we try to attract business investment from other states, we’re not even on the playing field,” he said.

That message was repeated numerous times, as business leaders noted that Iowa has the third-highest top corporate income tax rate in the country.

While the lower individual income tax rates will make Iowa more competitive and promote more growth and opportunity, “not including corporate tax reform would be disappointing,” said Joe Murphy of the Iowa Business Council.

“We’ve put a lot of good effort and good faith work into reforming the tax code in the past three or four years,” Murphy said. “Keep an open mind on corporate tax rates, be bold and seize this opportunity.”

The proposals were not without their detractors.

Mike Owen, with the progressive fiscal advocacy group Common Good Iowa, said flat taxes place an outsized burden for the funding of government services on lower-income residents. Owen also pushed back at the repeated claims that lowering income taxes will attract more people to live in Iowa.

“Unfortunately, this bill fails every test. It guts fairness and revenue,” Owen said.

A lobbyist for counties and county supervisors said those groups have some apprehension about the way the water quality and conservation fund will be financed under the Senate bill.

The Senate proposal would eliminate local governments’ local-option sales taxes, replace them with a statewide sales tax and return that revenue to the local governments while triggering the water quality and conservation funding.

The Sierra Club, which advocates for environmental policies, opposes the Senate plan because of that funding mechanism.

“That method, we believe, is inappropriate,” said Pam Mackey Taylor, director of the Sierra Club’s Iowa chapter.

Both proposals are scheduled for their next hearing in the legislative process, full committee hearings, on Thursday.

Comments: (515) 355-1300, erin.murphy@thegazette.com