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The Conservative Reader:
Iowa

Future of Commercial Tax Reform This Session Shaky

Future of Commercial Tax Reform This Session Shaky

tax battleDespite both Parties rhetoric to the contrary, I am hearing the chances of any significant Commercial Tax Reform in Iowa is dwindling.

Though legislation has passed each chamber, the Conference Committee tasked with finding a compromise both sides are comfortable with will struggle mightily.  This is largely due to the fact that the structure for reforming the tax code that passed by each chamber are not compatible with each other.  While Senate Democrats are insisting on a tax credit formula which businesses apply for and are granted, the House Republicans and the Governor want changes to the percentage assessed values are taxed at as well as lower caps on local property taxes.

I highly doubt that either side will give much on their chosen structure for reform, and it is hard to imagine a combination of these approaches being melded together without a confusing mess being created.  Additionally, as desperate as Republicans are to deliver lower taxes to their constituents, there is a feeling in the caucus that passing a half-measure now will make it harder to re-visit the issue in future sessions to achieve their true goal.  Conversely, Democrats would not mind getting their tax credit approached passed and fighting future battles with Republicans on increasing the value of the credits as they come up.

 

The Big Picture

After essentially controlling Iowa government for years with only a Senate majority, I don’t see anyway that House Republicans and Gov. Branstad can cave and allow Democrats to dictate the structure of tax reform–the one issue Republicans unquestionably own over Democrats.

As I’ve said here before, I do believe that Sen. Gronstal has a stronger hand than many realize.  Much like the Fiscal Cliff debate late last year where Congressional Republicans were forced to give in, Iowa Republicans are in the same tough position of seeing taxes rise if nothing is done.  This fact transfers a significant amount of leverage to Senate Democrats and Sen. Gronstal is operating accordingly.  As long as Senate Democrats perceive they can hold a majority while taxes rise this is the posture that Republicans will face. Looking long term, if Republicans are unable to extract major compromises from Democrats in the conference Committee–which I don’t expect–I am comfortable with once again waiting on a bill altogether.

Though it will be harder than in 2012 and is far from a given, with Branstad on the ballot in 2014 there is a shot at winning the Senate and a likelihood of holding the House. If a bill was done with Republicans holding both chambers and the Governors office clearly the dollar amount and scope of tax relief be much larger.  Perhaps more importantly there would also be a significant flat tax component and an opportunity to end the system of automatic future tax increases we have now.  The leverage that would be gained in future partisan tax scuffles by doing so would be worth it’s weight in gold.

Research and House Majority Leader Statement

The main bill in focus can be read here (SF 295)…and by the way I dare anyone to read this bill and tell me we can’t find a better way to write tax policy. In contrast, here is the Dix/Whitver optional Flat Tax bill offered earlier this session (SF 443).  Should this approach to our taxes be taken most citizens interaction with the tax code could be limited to lines 1-35 of this bill.  A welcome thought to a large majority regardless of Party.

Below is the full release from House Majority Leader Linda Upmyer regarding this topic:

Delivering significant property tax relief to the hardworking taxpayers of Iowa has been one of our top priorities since gaining the Majority three years ago. Each year we have passed numerous proposals to the Senate, but unfortunately have not been able to reach a consensus. I am optimistic that this will be the year for true reform.

This week the House passed a comprehensive tax relief proposal that provides significant property tax relief across Iowa and helps reduce Iowans’ income taxes.  The bill, SF 295, does not shift the tax burden between classes of property, but instead ensures that relief and reform is permanent, predictable, meaningful, and affects all classes of property.  If no action is taken on property tax relief, Iowa’s taxpayers are staring down the barrel of a $2.6 billion property tax increase over the next 10 years, with the majority of that falling to homeowners.

Under our current state tax structure, residential property taxpayers pay approximately half of Iowa’s property taxes.  While our proposal provides property tax relief across all classes of property, residential property taxpayers would benefit the most under this plan.

Currently, in terms of K-12 school funding, the state covers 87.5% of the school foundation formula.  The remaining amount needed for our schools to operate falls on the backs of local property taxpayers.  Our proposal increases the amount of state aid going to our schools and decreases the reliance on local property taxes.  As a result, local property taxpayers will be protected from future tax increases.

Our proposal would also implement a 20 percent rollback of taxable value on commercial and industrial property, which would occur over a period of four years, at five percent each year.  This would provide approximately $339 million in property tax relief when fully implemented.  Additionally, our plan would include a standing unlimited appropriation to backfill lost revenue from the rollback to local governments.

As previously mentioned, the bill also aims to reduce Iowans’ income taxes by giving individuals a choice to file under the current system or to use a 4.5 percent flat tax option.  This legislation makes Iowa’s tax system simpler, flatter, and fairer.  Under this proposal, each taxpayer is given a choice that will enable them to do what makes the most sense for their own household budget.

Finally, our proposal would send dollars back to Iowa taxpayers that have been collected in the Taxpayer Trust Fund.  Only after the Legislature and Governor have agreed to a final budget that meets the priorities of Iowans and funds the state’s obligations, any excess revenue would be returned to Iowa’s hardworking taxpayers.

SF 295 passed the House with bipartisan support and was sent back to the Senate for their consideration.  We look forward to continuing this discussion, listening to all ideas and proposals, and are hopeful a resolution will soon be reached that provides much-needed and real tax relief to all Iowans.

Why Iowa’s 2011 Legislative Session Matters to Conservatives: The Conservative Reader Interview with Senator Jack Whitver (Part 1 of 2)

Why Iowa’s 2011 Legislative Session Matters to Conservatives: The Conservative Reader Interview with Senator Jack Whitver (Part 1 of 2)

Three weeks removed from ending the third longest legislative session in Iowa history, I had the pleasure of sitting down for an interview with District 35’s representative in the Iowa Senate—Republican Jack Whitver. The main focus of our conversation was the results of the 172 day session and the political clouds already forming on the horizon for next year’s Senatorial get together.

In the interest of adding perspective, here is a brief overview of Senator Whitver’s political and business careers: He joined the Iowa Senate this year by virtue of winning a special election to fill the seat of Larry Noble, first beating five other Republicans in a truncated primary and then defeating Democrat John Calhoun (63%-36%). The district covers most of the northern half of Polk County including the Des Moines suburbs of Ankeny and Johnston, as well as Grimes, Polk City, Alleman, and Elkhart.

He is a former wide receiver for the Iowa State Cyclones and, in addition to being in the Senate, owns a three-location athletic training business called Acceleration Iowa, was the Offensive Coordinator for the Iowa Barnstormers last season, and is a law student at Drake University (no this is not a misprint… this is all in the same year).

 The Interview

At a glance it would be easy to say that the 2011 Iowa legislative session was a disappointment, as it saw high ranking agenda items from both political parties ultimately produce no legislation. As usual, however, the real story lies a few layers beneath the surface and, especially from a Conservative Republican viewpoint, is found by looking at and answering the question of why these things didn’t get done.

Taxes

Without a doubt, commercial and residential property tax relief was one of the few issues to truly burn white-hot during the session. All three legislative players had a plan on the table prescribing varying levels of aggressiveness in lowering Iowan’s taxes. The Governor’s plan was the most robust, followed by a more temperate approach from House Republicans, while the Senate Democrats’ plan was far tamer than the other two.

Reflecting just how high profile and high priority this issue was, Sen. Whitver regards his “no” vote as the most important one he cast in the session.

“I think the vote I am most proud of, and probably the toughest one I took, was on property taxes. That is something I campaigned on and something that needs to be done to help small businesses. The Senate Democrats brought forth a plan that I felt was not a good plan. It wasn’t nearly strong enough to do anything and was a long way away from what the House Republicans and the Governor were proposing. So it’s easy to sit down there and say ‘Well, it’s on property taxes so I am just going to vote yes and pass it.’ I was one of four Republicans that voted no, because I felt it wasn’t good enough, and I don’t want to put my name on a bill, even if it has the right title, if it wasn’t good enough. Because once you pass property tax reform, and it’s not a good bill, then it would be off the table next year, and the year after. So you don’t want to pass it for the sake of passing it.”

Beyond it being too small, he also saw the Democrat plan as a vehicle to allow local towns and counties to avoid tightening their belts and reducing their property taxes. “It’s basically taking our State income tax and our State sales tax and giving it to businesses in the form of a tax credit—as opposed to actually lowering taxes. I wasn’t a big fan of that tax shift.”

Sharing his philosophy of not settling on this issue, and certainly providing some welcome company, was Governor Branstad.

“To me the Governor showed a lot of confidence and leadership on this issue. Most governors, especially ones that don’t have the experience and the confidence he has would say, ‘Well, I said I wanted a property tax bill and I’ll take what I can get.’ Instead he said, ‘You know what, it’s not the one I want. We’ll come back and either do it in a special session or next year, but I’m not just going to try and save face and take whatever I can get.’ So I was happy about that.”

Mental Health Reform

Another issue that remained unresolved by the session was reforming the state’s mental health care system, otherwise known as SF 525. To the casual observer this amounted to a mere failure—true in the sense that no reform got passed but, once again, a look at why this was the case unearths undeniable evidence that a strong Conservative presence is asserting itself at the State House.

More than any other issue, this bill split the Senate Republican caucus, with ten voting in favor, nine voting against, and five not voting at all. The eventual fate of the bill was that it was assigned to a committee for further study. When asked about this divide in the Party and the debate in general, Sen. Whitver laid out the issue like this:

“Part of it is a rural-urban divide. There is a lot of agreement that redesigning the mental health care system needs to be done. The difference is, do we want the state to take control of it, or can we let the counties keep control. Being from Polk County, we offer a lot of services that maybe Adams County does not, because they have 4,000 people. If they want to design a system where every county has to offer the same services they are not going to take every county down to Adams County levels, they are going to bring all other counties up to Polk County levels. And at the end of the day it just looks like something that’s going to greatly expand the cost and scope of government, and I think a lot of us weren’t comfortable with that.”

The insight that this answer provides into the thought process of at least a sizeable chunk of Senate Republicans should bolster the resolve of Conservatives state-wide. It is hard to imagine a more positive indicator that Iowa Republicans are serious about actually achieving a smaller government—and not just talking about it.

Realize, especially on an emotionally sensitive topic like this one, what the specific logic they approached this issue with proves—they get it. They are viewing all things through a prism of justified skepticism, asking themselves, “Does this bill have the potential to explode into an over costly, ever expanding leviathan?” This type of foresight, had it been displayed by the Franklin Roosevelt and Lyndon Johnson administrations, could have sparred us much of the pain we are currently feeling at the Federal level.

The Reality of the Minority

In short, the reality of the minority is that you are forced to judge success differently. A look at the 293 votes Sen. Whitver cast reveals a splintered wasteland of votes cast in vain. As the roll calls of losing 26-24, 24-23, 26-21 began to pile up during the session, one has to wonder if the Senator would rather have been back running 5 yard drag routes into 240-pound Big 12 linebackers…minus his pads.

Making matters worse for this particular minority was being under the thumb of Senate Majority leader Mike Gronstal (D-Council Bluffs), who is renowned for both his liberalism and his penchant for using parliamentary maneuvers to avoid votes on hot-button issues. It didn’t take long for Sen. Whitver to experience this approach, “The first thing I saw when I got there was him changing the rules to not allow a majority of the Senators to bring up a bill.” When asked his thoughts on these tactics he joined the near unanimous chorus of Republican anger towards Gronstal, saying, “The ones that I really had a problem with were the ones that had the votes to pass. On same sex marriage, I think we had the votes to bring it up with a majority, and then to get it passed.”

Despite these circumstances, Sen. Whitver deploys a perspective that allows him to take it all in stride:

“Yeah it’s frustrating in the short term, but I have taken a longer view about being in the Senate. It’s a four year term and if I was just looking at the next election I could say, ‘Ok, I’ll vote for that property tax bill,’ but I’m going to look at the big picture. A lot of those 26-24 votes draw a line in the sand and say, ‘This is what Democrats want and this is what Republicans want, and this is our agenda going forward.’ So yeah, it is frustrating to go in there every day and vote no and see something pass, but in the long term I think we are setting up our agenda and what we are trying to accomplish pretty nicely.”

In a political minority, this is what success looks like.

Session Summary

In a state that President Obama carried by 9.5 points, and without a majority in both chambers, fully implementing a Conservative agenda was simply not realistic. In this scenario much of your work is done around the edges and in ensuring bad bills don’t pass. Sen. Whitver summed up the inroads the Party made, and how he sees the political landscape going forward, the following way:

“I think we accomplished three major things, though bills didn’t necessarily get passed out of it. The Democrats admitted that we needed commercial property tax relief and were passing bills talking about it. They admitted we needed the late term abortion bill, they didn’t pass the bill we wanted, but they were on record saying that we need to do something about it, and they agreed we need to limit spending. So three of our major priorities, they agreed with. We didn’t get the exact bills we wanted, but I think that shows that our message is the right message.”

Not only is it the right message, more importantly, a look inside the reasoning behind the votes shows it is a genuine message backed by principal and strong will.

The real story for Conservative Iowans is found in uncovering the reason why more bills failed to pass on major issues. In the case of tax reform, “not good enough” was the why. In the case of SF 525, apprehension to expansive government and cautious foresight were the why.

I think that all concerned Republicans would agree that if the fight is waged on the principals of lower taxes and smaller government, we will gladly take a draw…for now.

Part 2 of this interview will publish Monday August 8th.  Among the issues it will cover are: the battles looming once the next session is gavaled in, the state of public education in Iowa, the politics of Medicaid, and Iowa’s illegal immigration problem.

Click Here To Read Part 2


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