Tax deal takes lumps on the left, but Democrats drove a decent bargain

The big tax deal rolled out yesterday at the Statehouse is taking lumps on the left.

Iowa Citizens for Community Improvement says vote it down:

Iowa Citizens for Community Improvement Action Fund (CCI Action Fund) members blasted a tentative legislative deal to cut corporate property taxes after a confidential memo was leaked Thursday, saying the deal will severely limit the ability of state and local governments to provide basic public services without raising taxes on everyday Iowans.

The confidential conference committee report on Senate File 295 shows state government stands to lose $383.6 million in annual revenue by 2024, while local governments would lose $115.7 million by 2024.

CCI Action Fund members also say the bad deal allows current and future budget surpluses – created by spending cuts years ago – to be squandered in the form of a small income tax credit rather than being reinvested in state programs that have faced cuts.

“Iowa CCI Action Fund members support expanding the Earned Income Tax Credit for working families, but not as a horse-trade for a bad deal on income and corporate property taxes,” said CCI Action Fund member Larry Ginter, an independent family farmer from Rhodes.

“If this bad deal goes through, we will either see cuts to vital public services or more taxes on family farmers and everyday people, or both. Shame on any legislator that votes for this thing. Bipartisanship should not come at the expense of good policy that puts people first.”

The Iowa Policy Project wants to deck its halls:

It's Christmas for Walmart and McDonald's, which will happily receive property-tax breaks that they don't need, while their low-wage employees receive a better Earned Income Tax Credit.

This Christmas tree will grow bigger with each passing year, leaving less room in local budgets to respond to needs. The EITC expansion is important to working families - including 37 percent of all Iowa kids - but in the balance of who benefits from this package, it is a very small ornament.

If there is any question as to who benefits, Iowans should note that the EITC boost will be $35 million when fully phased in, compared to about 10 times that for property owners.

As we noted last month, the only justification for dealing with commercial property taxes was a political one. It has never been based on either an economic or competitive need to cut commercial property taxes in Iowa. So we have a politically derived package that will meet the demonstrated need to improve the EITC but leaves open new challenges to the support of critical public services in our state.

Over at Bleeding Heartland, desmoinesdem, points out multiple flaws in the "raw deal," including the fact that business owners who rent space likely won't benefit from property tax relief.

I understand all these concerns, and agree with some of them. And if you had your bleeding heart set on nothing big happening on taxes this year, I can see how this deal would be disappointing.

But we have a governor and a lot of legislators who got elected promising to do something on taxes, commercial property taxes in particular. That's not meaningless. So there was always at least a small chance a deal would happen. Turns out it was a better chance than many of us thought.

And in a world where a tax deal actually exists, I think Democrats drove a decent bargain.

Think about where Gov. Terry Branstad started this tax conversation. He wanted to roll the taxable value of commercial property back from 100 percent to 60 percent, while pushing the laughable notion that the state would be able to backfill lost local revenues. He also wanted to cut corporate income taxes in half.

Earlier this year, majority House Republicans signed off on a $570 million income tax credit,  giving back a big chunk of the state surplus in $369-per-taxpayer bites.

Instead, on Thursday, we got a deal that rolls commercial valuation back to 90 percent over two years. That's a long way from 60. A  lot of the property tax relief in the bill comes through state-funded tax credits very similar to the ones originally championed by Democrats.

That huge surplus-draining income tax credit is now bite-sized in comparison. All talk of corporate income tax cuts has vanished.

And Democrats get $35 million in tax relief for low-income families through an doubling of the Earned Income Tax Credit. A significant victory.

Local governments will take a revenue hit, which is a serious problem. It would be nice if this deal also gave local governments more options for raising revenue with voter approval. Unfortunately, the parental Statehouse doesn't trust the kids in the courthouses and city halls to handle new taxes. It's a conversation that should happen. Maybe the prospects for lost local revenues will spark that debate.

But the revenue hit is more manageable than it might have been. Republicans once talked about a huge commercial cut coupled with 2 percent limits on taxes and spending growth. This week's deal has only a 3 percent cap on local tax increases.

It's not perfect. Divided government is messy. It's not Democrats' dream tax deal, but neither is it the GOP's. It's a compromise. Half-loaves, disappointment, bright sides. You know, governing.