November 28, 2021

Branstad, Iowa House leaders differ on impact of tax bill

DES MOINES — Gov. Terry Branstad and House Republican leaders have different views on the impact of a tax bill making its way through the Iowa Legislature, a measure that would cut available state revenue by more than $95 million.

The House overwhelmingly voted 82-14 Thursday for legislation that would make retroactive tax changes to mirror updated federal guidelines.

Iowa lawmakers have voted previously in support of such measures with little fanfare, but things are different this time around.

Branstad didn’t support the retroactive component in his latest budget proposal, recommending instead that such a tax update — also known as coupling — go into effect this year. He also doesn’t support an accelerated depreciation option that benefits certain purchases and is backed by the business community.

“We feel that that impact on the budget would really make it impossible for us to meet the goals that we have for education funding and elsewhere,” Branstad said Monday. Ben Hammes, a spokesman for the governor, did not respond immediately to a message Thursday about the House vote.

The nonpartisan Legislative Services Agency projects the bill would reduce available state money in the current fiscal year by more than $95 million. That cut would affect surplus dollars, which Republicans don’t use to calculate what’s newly available for spending. They contend there’s still at least $153 million in new state revenue available, and possibly more.

Rep. Zach Nunn, R-Altoona, supported the bill ahead of the floor vote. He said the legislation is critical to “small businesses, family farms, and millions of individual” state residents, who expected to have the credits when filing this tax season.

“We are keeping taxes low for Iowa and good for the investment of our economy,” he said.

House Speaker Linda Upmeyer, R-Clear Lake, recognized the bill goes against Branstad’s wishes.

“We are critically looking at the budget,” she said. “We believe it can be done, and we’ll be sharing that with the governor and we’ll see where it goes.”

The bill now heads to the Democratic-majority Senate, where leaders have expressed reservations about its financial impact.

While the bill would bring a hit to the current fiscal year, there’s a positive in revenues for the next year. Republicans say that translates to about $85 million. However, LSA says that number is actually $10 million, and the remaining estimate comes from a separate automatic tax change that will bring in about $76 million.

Senate Majority Leader Mike Gronstal, D-Council Bluffs, wouldn’t comment on whether his caucus would support the bill. He noted Branstad’s position and questioned the purported revenue increases next fiscal year, particularly because the bill doesn’t consider any tax changes for 2016, just 2015.

“Let’s be honest. That’s a fiction and the House knows it,” he said.