Plenty of business issues at the Statehouse this year

Gov. Terry Branstad is pushing a business-friendly agenda.

Republicans have wrested control of the Iowa House by a lopsided 60-40 margin and have fortified their numbers in the Iowa Senate where Democrats hold a minimal 26-24 edge.

Democrats' pro-labor changes have been relegated to the political sidelines in favor of Branstad-led initiatives to ease commercial property tax burdens, cut Iowa's corporate income tax rate by half, spur job growth and rein in overzealous state rule-makers and regulators.

So why are people like Mike Ralston, the leading voice for the Iowa Association of Business & Industry (ABI), advising businesses large and small to lower their expectations now that members of the 84th General Assembly have taken their oaths of office and Branstad has been inaugurated for an unprecedented fifth, four-year term?

Ralston, who spent some time seeing government from the inside as former Gov. Tom Vilsack's revenue agency director, understands that split-control government requires both parties to merge in the middle to address budget challenges, forge compromises and chart a shared course for the future.

“What they've proposed is not the final product and I know there will be a ton of changes. And probably what we've seen so far isn't even close to what's going to be the final product,” Ralston said.

Branstad's comeback trail has been staked with plans to tackle nagging problems that were dogging the state and its business climate when he left Terrace Hill 12 years ago - sluggish job and population numbers, burdensome regulation, tax inequities and education challenges in an economy that demand higher skills. The incoming governor used a Yogi Berra analogy that “it's déjà vu all over again” in trying to address systemic barriers that continue to see America's growth move south and west.

Business influence

As a starting point, Branstad brought in former Sioux City Chamber of Commerce leader and development executive Debi Durham to revamp and redirect the state Department of Economic Development. Her charge:

? Turn it into a public-private Partnership for Progress that attempts to refocus on what works in helping attract and expand business opportunities.

? Stop doing things that don't carry a cost-benefit to taxpayers.

“I'm eager like everyone else to get a look at how that new public-private partnership works,” Ralston said. “I will say that the Department of Economic Development, when it's had its greatest success, it's when they've had that public-private partnership. I get the sense from Gov. Branstad that he wants to emphasize it more, he wants to be more aggressive with it and that can be really great.”

COMMERCIAL TAXES

Branstad hopes to tackle the state's vexing problem of relatively high commercial and industrial property tax burdens by:

? Lowering the rate to 60 percent for new business ventures up front.

? Phasing down the rate on existing commercial property to the same level over five years.

He estimates about $500 million is needed in state help for local governments and to make up for the lost revenue during a transition. He said it will be similar to when the state phased out the property tax on machinery and equipment in the 1990s.

Initial legislative reaction has been favorable. Senate Majority Leader Mike Gronstal, D-Council Bluffs, said the process can't merely shift tax burdens to other sectors and the state has to make good on its commitment to local entities.

Concern exists over whether the new approach is tantamount to government picking winners and losers. But Branstad said it will be better than the current arrangement. In that system, new ventures get tax abatements or incremental financing, meaning they pay no property tax for five or 10 years instead of a 60 percent stake that means more money to local governments as well.

Farmland taxes

Given that farm prices and land values are on the rise, Branstad also wants to place a 2 percent yearly cap - half of the normal 4 percent maximum increase - on tax increases for agricultural and residential property classes. That would avoid a spike under the current rollback system that bases assessments on a five-year rolling average tied to farm productivity, he said.

Tax waivers for entrepreneurship

Branstad said he wants to boost Iowa's 44th place ranking for entrepreneurial activity by using tax waivers and tuition tax credits to encourage new business start-ups in their early years. He plans to seek legislation that lets “true startup businesses” function free of state income tax for their first three years of operation and operate free of state sales taxes for their first three years, or first $50,000 in taxable purchases.

Qualifying companies would have to be new ventures started from scratch in Iowa, not spin-offs of existing businesses, he said.

TUITION TAX CREDITS

Branstad also proposed a tuition tax credit for businesses that hire students directly from community colleges. Under the proposal, Iowa employers would commit to hiring a student during his or her first year of classes at an Iowa community college and to pay for all of the student's tuition. In return, it would receive a tax credit equal to 50 percent of the tuition payment. The prospective employer could place reasonable requirements on the student's performance at the community college and establish a minimum length of employment. Employers would not be allowed to use the payment in lieu of a salary.

Overseeing state regulations

Branstad has indicated he will sign an executive order requiring a “small business and jobs impact statement” accompany any new administrative rule imposed by state agencies. He wants lawmakers to apply it to any proposed legislation. The idea, he said, is to:

? Close an “accountability gap” in state government regulation of business by reining in overzealous bureaucrats.

? Understand better how new laws may affect companies and jobs.

Branstad also wants lawmakers to establish top-to-bottom views of existing business regulations - using a staggered, four-year rolling sunset for all rules - to identify and eliminate redundancies, inefficiencies and what he calls “job-killing bureaucracy.” Such reforms, he said, can create a collaborative regulatory environment for small business development and job growth. That, in turn, would curb excessive government regulations that frustrate Iowa's ability to compete with business-friendly states when attracting and retaining companies and the jobs they create, he said.