Iowa State Republicans ready to lower income taxes despite tight budget

ALTOONA - Republican state lawmakers hope to lower Iowans' income taxes this year, despite facing what they acknowledge will be a difficult budget.

Republicans 'most definitely” will attempt to address income taxes during the upcoming legislative session, said Republican Rep. Tom Sands, chairman of the Iowa House's tax-writing Ways and Means Committee.

'While revenues may be tight at the state level, I also know and we know that for all of you to keep more of your hard-earned money in your pockets to use it to expand and grow your businesses and create more jobs is actually a revenue-increaser for the state of Iowa in the long-term,” Sands said Friday during the Iowa Taxpayers Association's annual legislative preview event with Statehouse leaders. 'So we will definitely be looking at some reform packages on the income tax.”

Sands, R-Wapello, joined Iowa House Speaker Kraig Paulsen, Iowa Senate Majority Leader Mike Gronstal and Rep. Dave Jacoby, D-Coralville, at Friday's event.

Gov. Terry Branstad was scheduled to speak at a separate session immediately after the legislative leaders, but he was delayed traveling from Washington, D.C., and could not attend.

Paulsen, R-Hiawatha, confirmed that House Republicans will attempt to enact income tax reform, even though Branstad and legislative leaders from both parties have said declining state revenues thanks largely to low commodity prices will make this year's budgetary process a difficult one.

'House Republicans continue to believe that while we are going to have a tight budget and we are going to have to make tough decisions, and as I think Sen. Gronstal correctly said the other day when we were together there's going to have to be some cuts made in the budget, we still don't really have a revenue problem in the state, we have a spending problem,” Paulsen said. 'So we're very comfortable going in and finding some opportunities to reduce spending in the state and in turn finding opportunities to reduce the tax burden in Iowa. And I think that absolutely includes income taxes.”

Gronstal, D-Council Bluffs, said Democrats in control of the Senate will be open to an income tax reduction, but he cautioned it must be balanced so Iowans of all income levels benefit, not just the wealthiest. He also served a reminder that the budget is tight in part because of previous financial commitments made to commercial property tax cuts and education initiatives.

'I certainly think we are open to pursuing that, but we have to see what the revenue estimates are,” Gronstal said. 'I don't think it will be easy to come to a compromise on that that we would consider balanced.”

Each of the four legislators said the state will fully fund the revenue losses suffered by cities and counties as a result of the property tax cut. When the cut passed in 2012, municipalities expressed concerns that state would not honor that commitment.

Gronstal insisted the state will honor its fiscal promise because not doing so would simply shift the tax burden to local governments.

'For the Senate Democrats, it's cast in stone,” Gronstal said, pounding his fist on the table and raising his voice for emphasis. In a humorous moment, Gronstal's outburst slightly startled the normally stoic Paulsen, who was seated next to Gronstal.

'We are not going to walk away from that commitment,” Gronstal said. 'We made local governments eat loss of revenue. We forced it on them. So they have a lot of skin in the game already. We are not going to back up on that reimbursement, because when we do, we create a giant tax shift in this state. …

'Local governments still have the responsibilities to provide police and fire protection and all those basic city services. If we underfund this, they're going to find a way to do it. And most of those ways are a direct tax shift to a whole bunch of different folks.”

Each of the four legislators said the state will fully fund the property tax cuts for the next few years, but some agreed that down the road, the Legislature may have to revisit the program as it becomes more expensive.