Gov. Branstad to sign historic Iowa tax package next week

DES MOINES – Gov. Terry Branstad has chosen a Hiawatha business as the backdrop next week when he signs the largest tax cut in Iowa history into law.

Branstad announced Wednesday that he will sign Senate File 295 at 1 p.m. at Hawkeye Ready-Mix, Inc. in Hiawatha next Wednesday, June 12. The historic, wide-ranging bill provides tax relief all classes of Iowa property -- agricultural, residential, commercial and industrial – as well as tax breaks to Iowa income earners.

The measure was one of the centerpiece priorities addressed by the split-control Legislature prior to adjourning the 130-day 2013 session last month.

Supporters called Senate File 295 a long-awaited compromise that will stimulate the economy by helping businesses create jobs and returning money to taxpayers' pockets. Detractors called the package an unsustainable drain on state resources that will hurt education, public safety and local governments.

According to the governor's office, the historic tax reduction package will provide about $4.9 billion in tax relief over 10 years.

Yearly growth in taxes on residential homes and farms will be capped at 3 percent – saving an estimated $500 million annually by year 10 of implementation.

Also, all commercial property owners will see permanent relief with rates cut by 10 percent over two years, while small businesses will get an extra break via a new tax credit totally $125 million. When the tax credit is fully phased in, bill's architects projected that at least $145,000 of property value on every business would be taxed at the residential rate and almost two-thirds of the businesses receiving the credit would see their entire property value taxed at the residential rate.

Lawmakers also agreed to provide an extra $33 million in state money to fully fund local property tax credits in fiscal 2014, and to give significant property tax relief for telecommunications and multi-residential properties.

Under the bipartisan accord, lawmakers agreed to create a new property classification called “multi-residential” that will include apartments, nursing homes, assisted living facilities and certain other rental property. Multi-residential properties eventually will be taxed at the residential rate via a 10-year phased period with a total fiscal impact to local governments of $85.3 million when fully implemented.

Another component provides a partial exemption from taxation for each telecommunication company on the value of the company's property, with half in assessment year 2013 and the remainder in assessment year 2014. When fully phased in, the change is projected to have a $16 million impact on local governments.

The compromise package also included about $90 million in annual income tax savings to Iowa taxpayers. The measure would provide tax credits to state income tax filers beginning in 2014 and double the earned income tax credit for low-income working families from the current 7 percent to 14 percent in tax year 2013 and then to 15 percent in tax year 2014.

Negotiators forged the hybrid compromise of the competing approaches favored by Branstad, majority House Republicans, and Democrats who control the Senate.

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