DES MOINES — Democrats are interested in smart tax policy, a lead Democrat on the Iowa House tax writing committee said, but the latest iteration of majority Republicans’ tax proposal seems to defy logic.
“The bottom line is that No. 1, we haven’t balanced the budget and we don’t have a budget in front of us right now,” Rep. Dave Jacoby, D-Coralville, said Thursday as Democrats and Republicans on the Ways and Means Committee retreated to separate, closed-door discussions on a GOP “Middle Class Tax Relief Act” that proposes to cut Iowans’ income taxes by $139 million next year and $298 million in 2020.
House Study Bill 671 calls for an 8.9 percent state income tax reduction for the “average” Iowan, with 90 percent of middle-class taxpayers seeing their state tax bill lowered. Over five years, Republicans said, it would lower Iowan’s tax burden by $1.3 billion.
In addition to the lack of a fiscal 2019 budget, Democrats are disappointed that HSB 671 doesn’t include a review of tax credits, something members of both parties have called for.
“There is no formal review of each tax credit to let each tax credit stand on its own and have a full committee review,” he said.
A Senate GOP tax plan to be rolled out later Thursday calls for the elimination of nearly all tax credits. Jacoby said the competing GOP tax plans only complicate the situation as each chamber’s majority party seeks to get the upper hand.
Fortunately, he said, “House Democrats are here to make this work.” And for them, “the math just does not add up.”
“It keeps coming back to the one issue — the budget is such a mess,” Jacoby said. “How can we afford now to take another $300 million chunk out of the budget on top of reneging on the commercial property tax bill?”
After passing property tax reform in 2013 that, among other things, cut taxes for commercial properties, the state has been providing much of the lost property tax revue to local governments to lessen the financial blow. But now there are plans to phase out those “backfill” payments to local governments.
Among highlights of the GOP House tax plan:
- Increase the standard deduction from $2,070 for single filers and $5,090 for couples to $3,000 and $7,500;
- Reduce rates for all income brackets;
- Create a small-business deduction for 25 percent of the federal qualified business income deduction from Iowa taxable income;
- Address tax fairness by levying taxes on streaming audio and video, online sellers, ride hailing services and digital goods;
- Make additional federal tax code coupling changes.