ALTOONA — Top legislative Republicans expect to continue looking at ways to improve Iowa’s income and property tax systems next session, but they said Friday any major changes to state corporate income tax rates likely will wait until the 2020 session.
Senate Majority Leader Jack Whitver, R-Ankeny, said the multiyear tax reform plan approved last May, which takes effect Jan. 1, will need some time to “bake” until the full effects are known.
Lawmakers want to conduct a comprehensive review of state tax credits next summer before making changes to business taxes, he said.
“The changes that we did last year were significant and historic,” Whitver said.
He expected Republicans who hold majorities of 32-18 in the Senate and 54-46 in the House will do a tax policy “cleanup” bill and discuss property tax issues in 2019 and tackle corporate tax issues in 2020, which would aim to improve the state’s competitive business climate.
House Majority Leader Chris Hagenow, R-Urbandale, said new people are in new positions after the 2018 election so there will be some adjustment time, given that legislative Republicans have not had their policy caucuses yet or pre-session meetings with Gov. Kim Reynolds and that the state Revenue Estimating Conference won’t issue budgeting forecasts until Dec. 13.
Hagenow said it is premature to talk about spending priorities or tax changes six weeks ahead of the next legislative session, slated to start Jan. 14, but he added “clearly there is an appetite to continue to improve Iowa’s tax code so we’re going to continue to look at that.”
“We’re Republicans. We want to reduce Iowans’ tax burdens, and we’re going to set out to do that wherever possible,” said Hagenow, one of five legislators who participated in a 90-minute forum at Friday’s Iowa Taxpayers Association meeting.
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Legislators said they will have a clearer budget picture after the Revenue Estimating Conference meets, but they conceded it will take some time to get a clear sense of the impact of income tax cuts and how much new revenue will be generated by the expanded sales tax collections on online purchases.
“We really need to be very cautious what we’re doing,” said Sen. Pam Jochum, D-Dubuque, ranking member of the Senate Ways and Means Committee, especially in light of the uncertainty to the farm economy caused by international trade disputes.
“I’m hoping that we move very cautiously on any further tax cuts and give the current changes time to be fully implemented so that we can get a better handle on what’s really happening,” she said.
Whitver said the state’s finances are in better shape than the past two fiscal years, and he expected majority Republicans to hold the line on government spending by appropriating less than the available revenue levels provided in state law while still funding priority needs.
He said legislators had to repay about $113 million in borrowed funds last session that they won’t have to in 2019, which will give them more money to allocate.
“There’s going to be people screaming at us to spend more money this next year at the Capitol,” Whitver said. “We need to be very diligent this year. We need to make sure we have the amount of money we need for the tax cuts to set in over the next few years. That’s why we’re going to keep our budgets as tight as we possibly can this year within reason. There are things that we’re definitely going to fund. But we can’t get out of control with our spending.”
Rep. Dave Jacoby, D-Coralville, ranking member of the House Ways and Means Committee, expressed skepticism the state would collect the nearly $120 million in higher projected sales tax receipts.
He also doubted the state’s economic growth would reach the levels needed to trigger income tax rate cuts and eliminate federal deductibility in 2023 as prescribed by the 2018 tax legislation.
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