Benefit of tax plan on businesses, farms debated

DES MOINES - Iowa farmers and small business owners would be winners under a Democratic tax plan that has yet to win the backing of groups representing those Iowans.

"I think this proposal is just a terrific proposal for small businesses and farmers," Sen. Bill Heckroth, D-Waverly, a financial planner, said Tuesday. "The vast majority of small business owners who I work with are also middle-class Iowans. They make less than $100,000, so I see them benefitting directly from what we're doing in this proposal."

House File 807, which would end federal deductibility and lower all income tax rates, is a response to economic development groups that have long urged lawmakers to reduce Iowa's income tax rate, often perceived to be the fourth highest in the nation, explained Senate Ways and Means Committee Chairman Joe Bolkcom, D-Iowa City.

The plan would lower tax rates for all Iowans and cut taxes for more than 60 percent of Iowans, he said. Additionally, Bolkcom said, the plan would result in lower taxes for the majority of small business owners and farmers who file under Schedules C and F of the state income tax code.

However, the Iowa Chamber Alliance, which represents chamber and economic development groups in 17 of Iowa's largest communities - including the chamber in Bolkcom's community - remain opposed to the plan. Bolkcom challenged the alliance and its executive director, David Roederer, who has been active in Republicans campaigns, to take off his "partisan blinders" when examining the plan.

The alliance would like to see lower tax rates, Roederer agreed, but said the state Department of Revenue is projecting that when the federal tax cuts expire in two years Iowans will pay $154 million more in state income taxes. When that happens, more people will see their taxes go up than down, he said.

Bolkcom disagrees with the department's scenario and expects Congress will adopt some middle-class tax relief when the so-called Bush tax cuts expire.

"To frame this as a tax increase is just incorrect," added House Ways and Means Committee Chairman Paul Shomshor, D-Council Bluffs, explaining Democrats want to collect $2.8 billion a year. "Under our plan, that number will not change."

If Democrats want their plan to remain revenue neutral after two years, Andy Warren of the National Federation of Independent Businesses suggested they spell out how they will do that in the bill.

HF 807 may be a tax cut in the first year, Warren said, "but business owners, unlike some policymakers, look beyond year one. They plan five, 10, 15 years out. They want predictability."

Shomshor is confident there are 51 votes for the bill in the House. However, debate on it has been delayed a number of time and House Majority Leader Kevin McCarthy, D-Des Moines, said he doesn't plan to bring it up Wednesday.