Iowa lawmakers mostly oppose Gov. Reynolds’ plan to raise sales tax

DES MOINES - A bipartisan group of lawmakers said Thursday they liked many elements of the Invest in Iowa package that Gov. Kim Reynolds proposed last session, but raising the state's sales tax by a penny was not one of them.

The panel members - House Speaker Pat Grassley, R-New Hartford, Rep. Jennifer Konfrst, D-Windsor Heights, and Sens. Dan Dawson, R-Council Bluffs, and Zach Wahls, D-Coralville - said they wanted to wait and see if Reynolds makes the same proposal or takes a different approach when she outlines her legislative and state budget plans in her Jan. 12 Condition of the State address.

But they told about 100 members of the Greater Des Moines Partnership via a Zoom breakfast meeting that they expected the Republican governor would face a tough sell in the GOP-led General Assembly if she again includes raising the state sales tax from 5 percent to 6 percent.

'The thing that probably caused the biggest consternation with us and will continue going forward is actually raising the sales tax a penny,” said Dawson, who will serve as Senate Ways and Means Committee chairman when lawmakers convene Jan. 11.

'Our caucus has always had the viewpoint, and I think it will be the case going forward, that we would like to achieve broad-based tax reform.”

Reynolds' multipronged Invest in Iowa Act proposed last session sought a 1 percent sales tax increase while cutting state income taxes by 10 percent, funding water quality efforts and easing local property taxes by shifting mental health costs to the state and phasing down property tax levies.

The plan - which she said amounted to an overall tax reduction - would generate about $540 million a year for the state. Of that, $172 million would go to natural resources, conservation, outdoor recreation and water quality improvement, while more than $80 million a year would be earmarked for mental health care.

Dawson said the Senate's 32 Republicans like the environmental and income tax cut pieces and are interested in providing property tax relief by shifting some county mental-health program costs to the state.

But there is concern that raising the sales tax would hurt Iowa's competitiveness, especially in border communities.

'I think there are a lot of things there that Senate Republicans are in agreement with and things that we want to work with her on,” he told the partnership, which supported the governor's plan as part of its 2021 legislative agenda.

Grassley said there are 'so many moving pieces” in what the governor was proposing that it would be a very 'time-consuming” process to move a package of ideas that each would pose a challenge if tackled as separate stand-alone bills.

Grassley hesitated to comment until he sees what the governor proposes next month, telling the business group 'it may be the exact same thing (as last year), but I think we want to be careful to just really cast huge judgments on it before we see what it is.”

Konfrst, the House minority whip, said Democrats were taking a similar wait-and-see approach but had concerns about aspects of the legislation and equity in tax policy that might hurt low-income Iowans.

Wahls, who will lead the 18-member Democratic minority in the Iowa Senate, said there are good and bad aspects to the governor's plan, with key concerns being equity and changing the formula by which the increased environmental funding would be dispersed.

'Obviously, we wouldn't take anything off the table completely, but I think, as the governor's plan was written last year, it would be a pretty hard sell in our caucus, and we'd have some really serious concerns and would want to see some changes heading into 2021,” he said.

Addressing a taxpayers' group last week, Reynolds said the COVID-19 pandemic has put Republican tax-cut plans on hold in Iowa but that she expects the pause will be temporary.

The governor said she is awaiting state revenue projections due out Friday before assembling her 2021 legislative agenda and state budget plan.

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