Last week Republican lawmakers fast-tracked a tax bill that costs $1 billion annually and sent it over the House. It was approved the Iowa Senate just a week after it was first introduced and Iowans have barely had time to digest the details and understand the real-world impacts.
Before the bill moves in the House, I think we should closely examine the long-term consequences and give Iowans an opportunity to review it and discuss with their neighbors, local leaders, and family.
The quick action by the Senate is also exactly why my colleagues and I worked to develop three common sense principles that should be applied to all tax reform bills this session.
1. It has to balance the state budget.
Given the state’s current budget deficit, our first principle makes sure any new tax bill doesn’t burden Iowans with more debt. The reality is the Governor just had to put $144 million on the state’s credit card to balance the state budget last year. Right now, the state budget is again in a deficit and we’re still waiting for another round of budget cuts in the current fiscal year.
The irony is the budget problems Iowa faces today are largely the result of a huge property tax cut for businesses and tax credits targeted to corporations that have risen exponentially over the last five years. Together, those giveaways have cost the state hundreds of millions of dollars annually and it’s led to more debt and budget cuts.
With the state budget currently in deficit, it’s impossible that another $1 billion tax break will keep the state budget balanced. If it’s approved, Iowans will be forced to pay for it through higher property taxes, more school closures, rising tuition for education after high school, and a pile of new debt.
We’ve also seen the devastating reality of similar tax cut plans passed in other states and would be smart to take heed. In Kansas, a similar plan for tax breaks led to low economic growth, budget cuts, and huge state deficits. The Legislature then had to reverse the tax cuts. In Oklahoma, massive tax breaks were approved and schools were forced to go to four days a week while health providers like nursing homes and hospitals have been forced to close, especially in rural areas.
2. It has to be fair and simple for all Iowans.
While the Senate bill will remove a couple of lines on the tax form for Iowans, it’s anything but fair for many Iowans because it favors the wealthy and special interests.
According to a non-partisan analysis of the bill, one third of Iowans would actually see a tax increase or no change. The Senate bill also takes away a $100 tax credit for volunteer fire fighters and emergency responders while handing out $790 million in new tax breaks to the special interests.
3. It has to provide relief for the middle class.
The Senate plan actually leaves out or raises taxes on one third of Iowans, including the middle class. It’s also irresponsible to tell a family that their income taxes will go down by $300 without telling them that they’ll be paying higher property taxes and thousands of dollars more when their kid goes to college. That isn’t real relief for the middle class.
The Senate plan doesn’t pass muster on any of the three key principles we laid out before session and everyday Iowans certainly won’t get the return for the dollars they pay under this plan. Right now, it’s unclear what tax plan, if any, will ultimately be approved this session. The Governor has introduced her own bill while Republican leaders in the House have yet to decide on their own version but insist something will be done.
For the last several years, Democrats have proposed bills to reform and rein in the state’s $12.1 billion in tax credits, corporate tax breaks, and tax exclusions already on the books. Unfortunately, those ideas were not passed. We’re going to keep working to restore fiscal discipline and balance the state budget so we can meet the priorities of Iowans.
Iowans should beware of any new big tax schemes offered up in an election year. The numbers just don’t add up.
Mark Smith, House Democratic Leader