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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.

Night of the Rising Stars: The Good, The Strange, and The Future

Night of the Rising Stars: The Good, The Strange, and The Future

If you did not know freshmen Kentucky Senator Rand Paul prior, and you attended Saturday night’s Iowa Republican Party event “Night of the Rising Stars” . . . then you certainly know him now.

I will get to Senator Paul, the evenings keynote speaker, momentarily but first let us briefly deal with the atmosphere and the purpose of the night’s event—recognizing the up and comers in the Iowa Republican Party.  The crowd of 300-400 took to their seats in the warm, ornate theatre of the Hoyt Sherman Place largely to celebrate the impressive and hard won gains by Iowa Republicans in the last election cycle.  The program included very short remarks from Senate Leader Paul McKinley, House Majority Leader Linda Upmeyer, Secretary of State Matt Schultz, Party Chairman Matt Strawn, and Governor Terry Branstad.  Following Governor Branstad, Senator Chuck Grassley was brought up to introduce Senator Paul.  I will spare you of the particulars, as the real story lay in the last two speakers, but will apprise you of a few things of note that did happen during the body of the program.

Believe it or not a quasi-disco atmosphere was attempted to be created, which was odd due to the advanced mean age of those in attendance.  Thanks to a mirror ball hung from the ceiling, each speaker took to the stage under a shower of colored lights as the venue’s sound system blasted a song of their choosing.   The “Rising Stars,” though some were in attendance, were mainly celebrated through videos which showed clips of them at the Statehouse telling the camera what they do for a living and why they chose to run for office.  The crowd largely sat silent for the videos, with the exception of small outbursts of cheering at the appearances of Kim Pearson, Kent Sorenson, and Jack Whitver.

Thirty-one year old Secretary of State Matt Schultz provided the evenings first shot of energy with a robust presentation that included a fiery defense of his signature issue, requiring a photo ID be shown before voting.  Party Chair Matt Strawn followed, in a warm and charismatic style, with a few words about how the party had sought out principled candidates to run, and emphasized that a Conservative philosophy is critical to the State’s future.  Most interestingly he applauded Matt Schultz for his hard stance on the voter ID proposal, signaling that the Party itself is digging in for a fight on this issue.  Governor Branstad spoke for roughly two minutes, mainly about the economy.  He vowed to veto any one year budget proposals that may get sent to him and declared that “Iowa is back open for business.”


And now ladies and gentlemen . . .The main event.

The saying that “politics often makes for strange bedfellows” is usually used in referencing politicians of opposing parties that find themselves in an odd alliance.  The surge of a more libertarian-tinged Republicanism represented by the Tea Party, however, has created an increasing number of strange bedfellows inside the GOP tent.  This was on full display Saturday night in the somewhat strange decision to have Chuck Grassley introduce Rand Paul to the stage.  Beyond the obvious, a prominent role on a night of “Rising Stars” given to a man, although beloved, who was first elected to Iowa government in 1958, it is hard to imagine a more antithetical Republican to Rand Paul than Chuck Grassley.  This is not to say that Republicans ever will, or should be, in lock step on every issue, but a brief glance at Grassley’s career reveals countless fundamental breaks with Rand Paul’s particular ideological philosophy.  Not to belabor the point but this is a list that includes, and is certainly not limited to, the following:

Senator Grassley is an ardent supporter and fighter for Federal ethanol subsidies, he proposed a Constitutional Amendment in 2009 to prohibit flag burning, and most notably was one of twenty Republican co-sponsors on a Senate bill in 1993 that would have mandated that all Americans have health insurance.  On the last point it could be argued that this was done as a Republican response/alternative to the Clinton administration’s proposed “Hillary Care,” but doing so perfectly illustrates the stark contrast between the two Senators.  Whether you agree with it or not Rand Paul is not interested in, nor is he willing, to alter an ideological principal based on a current political reality.  A debate can be had on the wisdom of this approach, and the point can surely be made that not engaging in this way while in the minority can result in a more damaging piece of legislation eventually being passed.   But if one is to get an accurate picture of Rand Paul it is essential to know that compromise in this fashion is absent from his genetic make-up.

Senator Grassley entered stage-left to an enthusiastic round of applause from the audience.  The high-mark of his speech, and the loudest applause, came when he delivered a stern message to U.S. Speaker of the House John Boehner, who is in the midst of budget cutting negotiations with Congressional Democrats.  To Boehner Grassley said in a raised voice, “Listen Mr. Speaker, we ran on a platform of cutting $100 billion, and were going to cut a $100 billion.”  Following a short, at times unsteady, few minutes that included multiple obligatory jokes about his age, he gave the floor to Senator Paul.

As was his custom during his Senate campaign, Paul hit the stage to AC/DC’s song “TNT,” and started with a few gracious words for Senator Grassley.  Normally at a political party event like this you would take kind and complimentary words being thrown back and forth amongst the speakers as standard procedure.  Although the pleasantries were exchanged on this night, taking it as a given would have been a mistake.  In addition to being an outspoken critic of past Republican Congresses, Senator Paul spent upwards of 15% of the text in his recently published book “The Tea Party Goes To Washington” brutalizing Republicans with a near prideful zeal that would even raise the eyebrow of Keith Olbermann.  Likely to the benefit of the audience, these kind remarks to Senator Grassley signaled that Senator Paul had self-imposed a “no fly zone” on fellow Republicans for the evening.

Senator Paul delivered his twenty-two minute address with no podium and without notes.  His delivery was very smooth and the concept of his speech was very well thought out.  Anyone who has heard his father before would quickly realize that he is a much better public speaker than his dad.  The premise of a large portion of his speech was to use relatively obscure stories from American history and weave them into the issues of the present in order to make his points and to answer questions that he, rightfully, assumed the audience would have about him.  Though it was not asked, one such question he answered was if he would compromise while in Washington.  He happens to sit in “The Great Compromiser” Henry Clay’s old desk in the Senate, and he used Clay’s story of “compromising” in agreeing to the expansion and extension of slavery in order to preserve the Union.  If choosing this particularly horrific compromise as his example was not enough to make his position known, before leaving the topic he challenged the audience to ask themselves, “Is sometimes compromising really a misplaced ideal?”

He then subtly addressed the unease that he creates, even amongst Conservatives, by telling the story of a doctor from Boston who, against the pleadings of the town’s medical community, saved countless people by putting into practice the medical procedure of inoculation.  The doctor had enough faith in the eventual result to try it on his own son.  By doing so he saved his son’s life, which ultimately led to the procedure become standard practice for all future generations.  He summarized the story, along with the defense of his approach to politics, by saying, “It took someone brave enough and bold enough to step forward against popular opinion and do what he felt was right.  I think we need more people like that.”

His boldness is probably best known to people in the area of cutting spending and reducing the size of government.  He spoke at length on the problem of overspending in Washington, repeatedly hitting on the theme that “We face a day of fiscal reckoning.”  In reference to the current debate regarding last year’s budget he scoffed at a possible compromise being in the ballpark of $33 billion.  “Were talking trillions in deficits, but were talking billions in cuts.”

Going into the event I was certainly in agreement with his general message and had read his book, but did not have a firm opinion of him one way or the other.  I left being very impressed, as did those sitting around me.  We apparently were not the only ones.  Reached for comment afterword State Senator Jack Whitver, one of the nights “Rising Stars,” responded “I was impressed with Senator Paul’s message.  I think his message resonates with Conservative voters.  He addressed the social issues and he was also very clear about the spending problems in Washington.”  He continued, “While he did not address whether he was going to run for President, I am confident that he will be part of the discussion in one way or another.”

In Paul’s recently published “The Tea Party Goes to Washington” he authors a simple sentence that is about as close as you can get to a mantra for how he plans to go about stamping Washington D.C. with his individual brand of Conservatism—“It’s hard to imagine changing the status-quo by only considering solutions acceptable to the status-quo.”  While pronouncements like this only recently have become red meat for Republicans, and in turn have become a plentiful fare, Senator Paul has working in his favor a unique and sub-conscious factor that leaves his bona fides and sincerity, in this regard anyways, hard to question.  Knowing whose house he grew up in one gets the feeling, if not the assurance, that his political mindset is one that he has had for quite some time.  A mindset that now happens to have an enthusiastic and receptive audience, and not the other way around.  Ironically, he may be in a position to turn the potential negative of his father’s political career into a positive that simultaneously affirms his genuineness while separating him from the growing number of newly converted “hardline” Conservatives.  This authenticity is something that will serve him well down the road if the Tea Party groundswell ends up having the legs to impact future ballot boxes in the same way it did in the 2010 mid-term elections.  In terms of speaking ability, substance, and grasp of the issues Senator Paul appears to be a future force on the national scene for the Republican Party.  If past is indeed prologue, four years from now Iowa GOP supporters may very well look back at this event as the first time they were tasked with mentally vetting Mr. Paul, and not the last.


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