Branstad: House GOP won’t buck rule change on manufacturing taxes

DES MOINES - Gov. Terry Branstad does not think his Republican colleagues in the Iowa Legislature will repeal his administration's rule change that will create a $40 million tax break on purchases of manufacturing supplies.

Branstad said Monday during his weekly news conference that the Republican-led Iowa House has passed legislation similar to the rule change his administration recently made, so he does not expect them to repeal the rule, which goes into effect July 1.

'I don't expect that Republicans in the Legislature are going to change their mind on this issue,” Branstad did.

Branstad said the rule change was made to update taxes on modern manufacturing. Critics said the former tax structure amounted to a double tax on manufacturing supplies.

Branstad said the change was made at the request of the Iowa Taxpayers Association.

'The whole idea of the sales tax was to be a consumption tax on the final product, not attached on things that go into making that product,” Branstad said. 'Consequently, because there's been no clear definition, there's been a lot of litigation, there's been a lot of appeals involving this. This will correct that.”

Statehouse Democrats have been critical of the rule change, noting it will create a state revenue reduction just months after Branstad vetoed funding for public schools and state-run mental health facilities.

'This is no change in the law. This is merely a clarification to modernize the definition under what modern manufacturing is all about,” Branstad said. 'This is one that was not fair and was not modern, and we needed a definition that fit the modern manufacturing, the fact that we have advanced manufacturing today that is dramatically different than it was 20, 30 years ago.”

In other news:

' Branstad maintained he is being prudent in not further pursuing a revocation of all state funding to Planned Parenthood.

Some conservatives have been pressing Branstad to revoke all funding to Planned Parenthood, which has drawn conservatives' ire after the release of secretly recorded videos that show an employee of the women's health care provider discussing fees for the transfer of fetal tissue for research purposes.

Branstad has said no state funding may be used by Planned Parenthood to perform abortions, and he has been advised by the state attorney general against pursuing the matter further.

Louisiana, which is governed by Republican presidential candidate Bobby Jindal, has been sued for attempting to revoke all funding to Planned Parenthood. On Monday, Texas also moved to revoke all funding to Planned Parenthood, potentially setting up another legal battle.

'I respect the fact that advocates are frustrated and want to see more,” Branstad said. 'I also feel an obligation to follow the law and stay within my legal authority.”

' Despite a recent reduction in the state's fiscal forecast, Branstad said he does not think the state will have to make budget cuts next year.

The state's Revenue Estimating Conference last week lowered state revenue estimates for the next fiscal year by $121 million.

'No, I don't think so,” Branstad said when asked if the reduction may force budget cuts next year. 'The good news is that we've been fiscally responsible, and we've made tough decisions to reduce the size and cost of government. … So I think we are well prepared to meet the challenges we are facing.”

' Branstad said the Iowa Finance Authority will fund a new $5 million program to help cities and counties provide incentives for construction projects to create affordable housing in communities that are struggling to keep up with demand. The $5 million would be made available in the form of low-interest loans.

'This is just one program that's available to try to help communities that are having a challenge providing affordable housing to their growing workforce,” Branstad said.