Groups “speak out” on proposed tax cut

Several groups have weighed in via email over the past 24 hours, expressing support and opposition to the tax bill which is scheduled for public debate in the Iowa House this afternoon (whenever the Democrats quit meeting in private to talk about it).  Words used in these missives range from “bold” and “excellent” to “misdirected” and “sucker.”  If you make it all the way through all the statements, you will find the word “quintile” which according to the dictionary means “the portion of a frequency distribution containing one fifth of the total sample.”

I share these email messages with you in this post, in the order they were received.

2.15.11: Proposed Twenty Percent Income Tax Cut is Good for Iowa Taxpayers

MUSCATINE, IA – Tomorrow, the Iowa House of Representatives is slated to debate House File 194, which is an across the board income tax cut of 20%.

Iowans for Tax Relief President, Ed Failor, Jr. issued the following statement:

“House File 194 is a bold move and an excellent start to help all Iowa income taxpayers by cutting the personal income tax by twenty percent across the board.

Lowering the tax burden on all Iowans will help spur growth, investment, and jobs in our great state. Reducing the Iowa personal income tax rates by twenty percent will directly put Iowans hard-earned money back into their hands,” said Failor.

It has been more than a decade since Iowa taxpayers have seen any kind of income tax reduction, the last time Iowans have seen a personal income tax reduction was in 1998, when the rates were lowered by ten percent. Then Governor Terry Branstad signed the bill into Law in 1997 with the support of a Republican controlled House and Senate.

Failor continued, “Since the 1998 income tax cut, net state tax collections from personal income tax have grown from $1.845 billion in State Fiscal Year 1997 (the year prior to the tax cut taking place) to $2.749 billion in State Fiscal Year 2010. This growth shows income tax cuts truly spark the economy. There could not be a better time for an income tax cut in our state.

I commend House Speaker Paulsen, House Majority Leader Upmeyer, Ways and Means Chairman Sands, and House Majority Whip Helland the floor manager of the bill, for making the Iowa taxpayer the top priority at the Statehouse.”

The bill is up for debate tomorrow, so please call your Representatives and urge them to support the income tax cut House File 194. Use our “Legislator Lookup” feature to find your elected officials at www.taxrelief.orghttp://www.votermailer1.com/link.php?M=9094326&N=1930&L=95&F=H.

2.16.11: ABI Urges House to Approve Income Tax Cut

Cut will help “jumpstart” economy

DES MOINES – Iowa’s largest business association today urged the Iowa House to pass HF 194, which cuts personal income taxes by 20% for all Iowans.  The Iowa Association of Business and Industry (ABI), whose members employ over 300,000 Iowans called the tax cut a great jumpstart to the struggling economy.

“Letting Iowans at all ranges of income keep more of their own hard-earned money is a good thing.  It will also help jumpstart economic activity by job creators,” said Sarah McDonald Hasken, ABI Board Chair.  Hasken is Vice President and Corporate Secretary at A.Y. McDonald Manufacturing Company in Dubuque.

It’s estimated that more than 60-80% of Iowa businesses are organized as sole proprietors, partnerships, limited liability companies and S corporations.  The business owners of those entities pay income tax at the individual level.  “Thousands of businesses located in every Iowa community will benefit from having more income to invest, grow and hire with this tax cut,” said ABI President Mike Ralston.

A top legislative priority of ABI this year is to reduce the overall tax burden for Iowans while achieving better quality governmental services for less cost.   ABI supports a tax system that includes equity, simplicity, predictability, and government accountability.

As The Voice of Iowa Business Since 1903, ABI is comprised of approximately 1,400 Iowa businesses employing more than 300,000 Iowans. Member organizations represent all types and sizes of business. ABI’s mission is to collectively provide a strong, unified voice to business and industry on issues impacting Iowa employers. For more, go to www.iowaabi.org.

2.16.11: Iowa Taxpayers Association supports income tax reduction in House File 94

(Wednesday, February 16, 2011) Des Moines – The Iowa Taxpayers Association (ITA), the state’s leading nonpartisan tax policy resource supports the adoption of House File 194 that would provide tax relief for Subchapter “S” business firms, LLC’s, and sole proprietors.

“There is no question that small Iowa businesses would be best served by keeping more money within their operations, thus fostering the ability to create growth and employment opportunities”, said ITA President Ed Wallace.

The bill is expected to be debated today in the Iowa House of Representatives.

2.16.11: Income Tax Measure Costly, Increases Inequities
 
A “Simpsons” cartoon by Nick Anderson is applicable to a marquee piece of tax legislation moving in the Iowa House. Homer Simpson is holding two $10 bills, exclaiming, “Woo, hoo, I got a tax cut!” His boss, Mr. Burns, is observing from his seat on sacks of money: “Sucker …”
 
House File 194 provides a 20 percent cut in Iowa’s individual income tax rates. The issue is not just that the state of Iowa, recovering from a recession and major cuts to education and other public services, cannot afford such a tax cut and sustain essential public services — though that issue is very real. The Fiscal Note for HF194 puts the cost at $330 million for FY2012, $704.1 million for FY2013, $711.5 million for FY2014, and $750.6 million in FY2015. This comes when Iowans are told revenues are low.
 
The problem also is that such a tax cut is very much misdirected, taking Iowa tax policy further down the path of helping the wealthiest the most — a trend building since the mid-1990s, starting with a 10 percent cut in income tax rates in 1997. Since then, Iowa lawmakers have passed more income-tax cuts, avoided equitable income-tax reform, and raised and encouraged local governments to raise sales and property taxes, which take a greater share of income of low-income and middle-income taxpayers than of high-income taxpayers.
 
HF194 provides yet another windfall primarily for the wealthiest. According to an analysis by the Institute on Taxation and Economic Policy, the effect of the tax cut will average $18 for taxpayers in the lowest quintile of Iowa taxpayers (with incomes below $21,000) and $6,822 for taxpayers in the top 1 percent of Iowa taxpayers (with incomes of 358,000 or more…

…While the bottom one-fifth of Iowa taxpayers see their overall taxes (sales, property and income combined) reduced by about 1.6 percent, the top 1 percent see their overall tax burden reduced by about 9.3 percent. Further, a disproportionate share of those in the top 1 percent of income are out-of-state tax filers who made profits in Iowa and they (or their home states) would be big beneficiaries of such cuts.
 
Moreover, such a cut does nothing to reduce any of the current inequities in Iowa’s tax code as they relate to working families with children, who are the most heavily taxed of all Iowans relative to their discretionary income. While a family of four making $40,000 owes no federal income tax, that family owes more than $1,200 in Iowa income taxes. At the same time, a retired couple with no children and $40,000 in Social Security and pension income owes no state income tax.
 
In fact, as noted by the official Fiscal Note on HF194, a reduction in income tax would mean a reduction for many school districts, which count on income surtaxes for portions of their budgets. This could force another tax shift to property taxes, because school districts fund their Physical Plant and Equipment and Instructional Support programs through a combination of property tax and local income surtax. Districts would be able to make up for lost income surtax with a greater share of those programs being funded through property tax. The surtax is used by 85 percent of Iowa’s 359 school districts.
 
Alternatives
 
Doubling the state Earned Income Tax Credit (from 7 percent to 14 percent of the federal EITC) would provide much greater benefit to 70,000 working low- and moderate-income families with children than the cuts in rates proposed in HF194 and would be a step to addressing a significant problem in Iowa’s income tax law. It would cost the state less than one-twentieth the cost of the tax cut in HF194. It also could be coupled with more appropriate tax treatment of select capital gains and other tax exemptions to high-income families and cover its cost. Such alternatives are much more appropriate ways to provide for tax fairness to hard-working Iowa families.
 
The Iowa Fiscal Partnership is a joint budget and tax policy initiative of two nonpartisan, Iowa-based organizations, the Iowa Policy Project in Iowa City and the Child & Family Policy Center in Des Moines. Find IFP on the web at www.iowafiscal.org.