URBANDALE — GOP legislators want to make significant income tax cuts, provide property tax relief and fund new mental-health commitments, but the jury still is out on whether they will support Gov. Kim Reynolds’ approach — which includes a state sales tax increase as part of the overall package — without modification.
Senate President Charles Schneider, R-West Des Moines, said majority Senate Republicans want to see more tax relief than the net $7 million the governor has proposed.
One option under study is to phase out the property tax “backfill” to local governments, started in 2013, as the state takes over property tax levies that fund regional mental health services.
“The Senate likes the income tax cuts that the governor is proposing,” Schneider said. “We’d like to see a larger net tax reduction overall. So we want to see what we can get done, and it will take time to make sure that we’re getting things to a level that we can get our caucus comfortable with and that we can get the governor comfortable with, too.”
On the Iowa House side, GOP representatives are preparing two fiscal 2021 state budget plans — one built on the governor’s plan and another one without. The “without” budget is in case there are not 51 votes in the House and 26 in the Senate to proceed with the governor’s plan.
Rep. Ashley Hinson, R-Marion, told members of the Westside Conservative Club on Wednesday that the House is being “overly cautious,” and she expects to see fiscal 2021 spending targets soon after the state Revenue Estimating Conference meets Thursday.
The conference will release the final revenue numbers the lawmakers and the governor will use in finalizing a number of priorities for this session.
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“I think what our appropriations chair wants to do is to be ready to handle both in case we need to pivot quickly. I think there’s a good chance that (the governor’s plan) moves forward in some form — maybe not what it looks like right now,” Hinson said in an interview.
“I think all of us look at this year that we don’t want to be here until June fighting over those details,” she added. “I would say by the end of the month I think we probably have to have a clear decision if we’re going to support that or not.”
The governor’s multipronged Invest in Iowa Act unveiled in January seeks a penny sales tax increase while cutting income taxes by 10 percent, funding water quality and easing property taxes by shifting mental-health costs to the state and phasing down levies.
Hinson said she got the hard sell from the governor during one of Reynolds’ recent tour stops in Linn County, but she said “I’m not 100 percent there yet. I have some concerns over the constitutional protection of the money.”
“There’s nothing to say that a future Legislature can’t come in and scoop some of that money, so I think to get me there would have to have some sort of protection on those resources,” Hinson said.
She also had concerns about changing the income tax “triggers” that she sees as a good fiscal safeguard.
Schneider said the Senate is working on one budget plan and doing various runs through the state Department of Revenue that include accelerating 2018 income tax “triggers” and assessing the property tax phasedown of the local government backfill and mental health levies that would raise the net tax reduction to at least $157 million.
“I don’t think anyone in our caucus is saying we’re going to throw anything overboard at this point, or ever, for that matter,” said Senate Majority Leader Jack Whitver, R-Ankeny. “We want a significant tax reform package, and when you include the mental health part, I think backfill is an area that we could consider.”
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Schneider, who also attended the Westside Conservative Club meeting, said nothing is being ruled out at this point.
“There’s a shift nationwide of moving things toward a consumption-based tax, like a sales tax, and off income tax revenue. So that’s nothing new,” he said. “We’ve voted to broaden the base of the sales tax in the past to help us drive down income taxes. So I think the appetite is there within our caucus to do it. It just has to be something that the caucus feels would be significant enough to take that vote.”
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