Tax, budget talks hit snag in Iowa Legislature

Progress toward a House-Senate conference committee reaching agreement on a package of tax policy and spending changes hit a bump in the road today.

Talks stalled when House Republicans insisted on creating a tax relief fund with 100 percent of the state's yearly ending balance flowing into the account, while Senate Democrats wanted to move ahead with $45.7 million in supplemental spending needs and tax “coupling” provisions that would conform Iowa tax laws with federal changes but hold back the tax relief fund to allow for more discussion.

Rep. Scott Raecker, R-Urbandale, a committee co-chairman, said he did not believe the panel was approaching an impasse but he added “we've probably made less progress today than we've made in other days. At least it's still continuing the conversation.”

On Wednesday, legislative Democrats agreed to accept a GOP call for creating a special fund designed to capture surplus state dollars for tax relief. However, they significantly restricted the amount of excess revenue that would flow into the account – from 100 percent to 25 percent – insisted the tax relief be earmarked solely for property tax reductions and would start the fund effective in fiscal 2014 rather than next year.

Raecker said Republicans were standing firm on their tax relief fund position or needed “something really, really close” to be able to finalize a compromise.

Bolkcom countered that the conference committee should proceed with approval of $45.7 million in supplemental funding needed for essential services – especially for corrections - through June 30 – and the tax coupling provisions to facilitate current and future tax return preparations.

“Let's move ahead with these things that we have agreement on and continue to work on these other items,” Bolkcom said. “There are a whole host of other issues this session that are still unresolved. I think there are going to be plenty of opportunities to bring back specific ideas that House Republicans care about and put them on the table and have them be seriously considered.”

However, Republicans declined that option, which would take away leverage to resolve the tax relief fund differences.

“I still am optimistic that we can get this done. It just takes some time,” Raecker said. “We're here, we're talking about difficult issues and we're going to come to resolution on these issues.”

Bolkcom said the tax relief fund is a significant sticking point because Democrats view it as “a slush fund, a gimmick, off budget not transparent” account, while Raecker said it is an essential element because it guarantees that “Iowa taxpayers will be at the table” in state budget considerations.

Negotiators said they planned to meet again on Thursday or early next week to resume talks.