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Commentary/Politics - Iowa Politics
Written by Lynn Campbell   
Friday, 10 April 2009 14:08

Iowa Democrats Unveil Amended plan for Income-Tax Reform

A newly revised bill eliminating federal deductibility is no longer revenue-neutral and would now mean a $55-million tax cut for Iowans in the first two years. But Democrats did not indicate where the money would come from to pay for the plan, and Republicans pointed out that the plan would turn into a tax increase in future years.

"This would be a $55-million tax cut for hard-working Iowans," Culver told reporters. "I would think that Republicans and Democrats would support a tax cut of that size. It's no longer revenue-neutral, this is going to be a very favorable thing for the taxpayers of Iowa overall."

An analysis by the Iowa Department of Revenue shows the revised proposal to eliminate federal deductibility and lower tax rates will result in a net tax reduction of $20.2 million in tax year 2009 and $34.9 million in tax year 2010. But the analysis showed increased taxes of $154.1 million in 2011, $157.1 million in 2012, and $149 million in 2013 in anticipation of the federal government ending the Bush tax cuts.

The amended plan would also increase the standard income-tax deduction from $1,780 to $2,710 for a single person and from $4,310 to $5,420 for a married couple, and would establish a new Refundable Iowa College Student Credit of $100.

But Paulsen said Republicans remain opposed to the revised income-tax-reform bill, which raises taxes starting in 2011 and still has "losers" - people who end up paying more taxes - in every tax bracket, including those making less than $20,000.

"It's a slight tax reduction for the first two years, and [then] it's a tax increase," Paulsen said. "You're at a quarter-billion tax increase by the time you get to the fourth year. This is why Iowans and the electorate citizens get skeptical when politicians say they're going to provide tax relief. Because this isn't tax relief. This is raising $150 million a year so the state has more money to spend. ...

"If you look at tax year 2013 ... you've still got losers," Paulsen said. "You've got winners making over $250,000, and you've got losers making less than $48,000."

Iowans for Tax Relief said calling the bill a tax cut "is certainly imaginative."

"Iowa taxpayers are tired of being bullied into paying more and more taxes," said Ed Failor Jr., president of Iowans for Tax Relief. "The net result of this bill over the next five years is a more-than-$400-million tax increase on Iowans. How on earth is that a tax cut?"

Budget Cuts to Spur Layoffs; Republicans Offer Cost Savings

After a week of debating budget bills, the Iowa House on Thursday night debated and approved 55-42 the biggest one of all: a $1.2-billion health and human-services budget bill that cuts $112 million and could lead to as many as 500 layoffs among the 5,700 workers at the Iowa Department of Human Services (DHS).

"I've got concerns that there's 300 to 500 layoffs," said Representative Scott Raecker (R-Urbandale). "We're going to have people that are left waiting for services in Iowa."

The proposed spending plan cuts 12.8 percent to most areas of public health, human services, elder affairs, and veterans affairs. It reduces money for DHS field services by $6.2 million, which translates into a $13-million decrease because of federal matching money.

"Sadly, this bill leaves behind some of our most vulnerable citizens," said Representative Peter Cownie (R-West Des Moines), who said in Polk County there are 522 people on a waiting list for mental-health services.

But Representative Deborah Berry (D-Waterloo) described how difficult it is to find the money. "The needs are so great when it comes to this human-services budget," she said. "I think all of us want to make sure that we can help those in need, but the reality is, when you have to do a 13-percent cut, there are going to be those programs and areas that may not get what they need."

Republicans offered $152.5 million in savings through amendments to several budget bills this week, but Democrats only accepted about $1 million worth, shutting the door on cost-saving measures such as reducing the state vehicle fleet or cutting office-supply budgets in half.