January has historically been a stressful month in my household as my wife battles the many forms it takes for us to comply with the tax code. I’ve heard many “early birds” express disdain about the inability to finish their taxes since the tax law is still being decided upon by the Legislature.
Many Iowans and tax preparers would like to see Iowa couple with the federal changes quickly so tax preparation can get under way. To that end, House Study Bill 38 passed out of subcommittee last week and was moved out of the Ways and Means Committee in bipartisan fashion on Monday with a vote of 24-0.
Some of the significant federal tax legislation enacted tht affect the 2012 and 2013 tax year include the following:
• Deduction for up to $250 for out-of-pocket expenses for teachers
• Tuition and fees deduction for higher education expenses
• Election to deduct state sales/use tax in lieu of state income tax as an itemized deduction
• Deduction for mortgage insurance premiums as deductible qualified residence interest
• Nontaxable IRA transfers to eligible charities
• Small businesses can now expense (instead of depreciate) the first $500,000 of equipment cost
Some of the provisions that affect 2013 and subsequent tax years include the following:
• Provides 50 percent (accelerated) depreciation for assets acquired in 2013 only
• Places a limitation on itemized deduction for high income taxpayers
• Permanently extends the amount ($3,000 for one child, $6,000 for two or more children) for child and dependent care credit
• Extends higher income thresholds and higher credits with families with three or more children for the earned income tax credit for five more years through 2017
This bill will now move to the House floor for consideration. As you visit with tax preparers, you can tell them the House is moving quickly to provide certainty for taxpayers waiting to file their taxes.
Another hot topic right now is the expansion of Medicaid. Currently, 10 states have decided not to implement Medicaid expansion, while five other states are leaning against it.
Fourteen states are implementing Medicaid expansion, with four states leaning toward expansion. Seventeen states are undecided.
This split shows that many states are struggling with a critically important decision that will impact their state’s budget for years to come.
I’m aware of the news media influencing Americans with reasons Medicaid expansion is the way to go. The purpose of my comments is to consider the other side of the coin.
First, there are no take backs. Studies show that states almost never rescind Medicaid coverage once it is implemented. If Iowa expands Medicaid, the estimates are that 150,000 additional people would be covered.
In a state that has seen the old Medicaid program grow 50 percent in the last 12 years, a decision to cover an additional 150,000 lives should not be taken lightly.
Further, we are dealing with a federal government that is flat-out broke. Given this, it seems unwise to enter into the agreement that Medicaid is primarily funded in federal dollars.
Not too long ago, when our own state’s budget was in a financial pinch, Governor Culver implemented a 10-percent across-the-board cut in our state’s budget. If the U.S. government did the same, Iowa’s $6 billion handout would be reduced by $600 million. That is pretty significant to our state budget, which brings me to my next point.
Nationally, Medicaid has eclipsed K-12 education as the largest single share of total state spending. Medicaid would have to rise significantly to do that in Iowa, but the point is that every state dollar that is spent on Medicaid expansion is one less dollar for other programs in the state budget.
Many folks also want the state budget to include allowable growth for schools and funding for our crumbling infrastructure. The problem is that the pot of money is only so big.
We can’t guarantee how much Medicaid will truly impact our budget. Therefore we will either need to reduce benefits elsewhere or raise taxes to keep the state fully funded. Neither choice is a popular one.
The state of Florida has taken a different approach that might merit looking into:
• Their new system has a “Medicaid Marketplace” where patients can choose from at least two Medicaid plans
• Patients get a customized benefits package; plans offer extra benefits and specialty care
• Patients can “opt-out” and get subsidized private coverage for themselves and their families
To be sure, this issue needs to be dealt with and unfortunately there are no easy answers.
On a more positive note, this past Thursday legislators were encouraged to wear red in recognition of the 10th Annual American Heart Association “Wear Red Day.” Feb. 1 has been set aside to show support for women and their fight against heart disease.
This issue is near to my heart, as my own grandmother passed away from heart disease several years ago.
Since February is American Heart Month, I encourage you to visit your doctor about heart health, or visit an area medical clinic. Many of them are hosting “Love Your Heart” type programs to test for heart disease and provide other screenings.
Feel free to contact me with your issues or concerns as they arise either by phone at (515) 281-3221, email at greg.heartsill(at sign)legis.iowa.gov, or in person when visiting the Capitol. Again, thank you for the honor of representing you in House District 28.