DES MOINES — Proposed Republican tax cut plans would have major impacts but not necessarily to the benefit of all Iowans, according to analyses presented Monday at the Capitol.
Children would lose in the budget scenarios created by tax-cut plans offered by Gov. Kim Reynolds and GOP majorities in the House and Senate, while Iowa seniors would fare well, said Charlie Bruner, executive director of the Child and Family Policy Center at a briefing attended by Democratic lawmakers and human services lobbyists.
Bruner said he offered his analysis “as an individual citizen and without compensation from any organization.”
He concluded from his study that “tax reductions are not, in themselves, tax reform.”
That was not lost on his audience, some of whom questioned how Republicans can propose tax cuts when they’ve had to make midyear cuts to the budget two years in a row.
“I don’t see any case for the state to give up any more revenue,” said Sen. Joe Bolkcom, D-Iowa City. Although he favors the “tax modernization” proposals regarding e-commerce, he said the state “doesn’t have adequate revenue today to entertain reduction.”
Bruner said the governor’s proposal, which was the basis for the House Republican plan, would result in tax increases of nearly $6 a year for Iowans with incomes of $30,000 to $60,000 to $42 for people in the $100,000 to $250,000 range. The increases, he said, are the net effect of charging sales taxes on the “new ecomony,” such as online shopping.
Those with incomes less than $30,000 would see a cut of about $18.
“I don’t know if that’s enough for a Happy Meal for a family of four,” Sen. Herman Quirmbach, D-Ames, said.
Bruner said the higher standard deduction in all three Republican plans is good news for taxpayers, especially those at the lower end of the income spectrum.
Reynolds would raise the deduction to $4,000 for single filers and $8,000 for couples filing jointly. The House plan raises it to $3,000 and $7,000 and the Senate ups the deduction to $12,000 and $24,000, effectively coupling with the federal tax code.
“One of biggest inequities in our income tax system is the failure to recognize the cost to households through the standard deduction of raising kids or caring for dependent adults,” Bruner said. “That’s where Iowa tax system falls really short.”
About 70 percent of Iowa tax filers take the federal standard deduction, he said. But more than half itemize on their state tax return, he added.
In addition to not fully recognizing the cost of raising children, the tax code favors seniors, especially those with “very high incomes,” Bruner said.
Iowa doesn’t tax Social Security benefits and the Senate plan would double the pension exclusion from $6,000 to $12,000. The governor also increases the amount of pension income exempted from state taxes.
“I’m a senior now and I want to say you’ve already done more than enough for me in terms of giving me preferential treatment on the tax code,” Bruner said. “A retiree is treated much more favorably than married with kids or single filers. Seniors are the age group least likely to live in poverty, and a substantial portion of seniors are among the wealthiest.”
If the Legislature adopts tax changes that reduce state revenue, Bruner said, children and families could feel the largest effect.
That’s because about 72 percent of the Iowa budget goes toward services that directly or indirectly impact children, Bruner said. In the $7.24 billion 2017 budget, 41 percent goes to school aid, 18 percent for Medicaid and 12 percent for higher education.
“Anything you do that erodes revenue almost necessarily will affect kids in one budget item or another,” he said.