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Governor Calls For Tax Changes In Condition Of The State Speech; Lawmakers Noncommittal

John Pemble
Gov. Kim Reynolds delivers her third condition of the state address at the Iowa Capitol Tuesday.

Republican Gov. Kim Reynolds called for big changes to Iowa’s tax system in her third Condition of the State address Tuesday, but lawmakers say they need more details before backing her proposal.

Reynolds is calling her plan the “Invest in Iowa Act,” though she has yet to release a bill.

It would raise the state sales tax 1 percent, with three-eighths of the new revenue going to fund the Natural Resources and Outdoor Recreation Trust Fund voters approved ten years ago.

The large majority of the remaining revenue would go toward supporting further income tax cuts on top of those passed in 2018, which have not been fully implemented yet.

“These investments will not only aid our conservation efforts, they will improve our quality of life, and will help us retain and recruit a new generation of Iowans,” Reynolds said.

She is also proposing that the state take on about 70 percent of the costs of the county-funded mental health system, allowing for some local property tax reductions.

“No parent, family member, or friend should be told that treatment isn’t available for their loved one,” Reynolds said. “By establishing a dedicated and stable fund for mental health, we will give hope to so many who are suffering in silence. It’s a promise we’ve made, and it’s a promise I intend to keep.”

But Reynolds does not seem to have buy-in from lawmakers just yet.

House Speaker Pat Grassley, R-New Hartford, said House Republicans still need to discuss the governor’s plan and see the details.

“There is a lot of moving parts. I don’t think that changed at all today,” Grassley said. “And I won’t—until I see the details—comment on anything, when I don’t even know if the [House Republican] caucus has the will to do anything, let alone whatever the details will look like when we get them.”

Senate President Charles Schneider, R-West Des Moines, said Senate Republicans also need to see the details, but he is excited about more income tax cuts.

“I thought it was a good place for us to start,” Schneider said of Reynolds’ tax plan.

Democratic leaders say they share the governor’s priorities of funding water quality projects and mental health, but they have questions and concerns about the path Reynolds wants to take.

“Very concerned when you’re raising sales tax and reducing income tax,” said Senate Minority Leader Janet Petersen, D-Des Moines. “We don’t want that to hurt our retired Iowans and low-income Iowans, so wanting to take a close look at how that will pan out.”

“The question is, are we cutting taxes, or are we shifting burdens?” asked House Minority Leader Todd Prichard, D-Charles City.

Petersen and Prichard also worry about Reynolds’ intention to change the funding allocation formula for the water quality and outdoor recreation fund.

“There’s a lot of Iowans concerned that it will only help polluters,” Petersen said.

Governor sets out additional legislative priorities for 2020

The governor’s proposed budget represents a 4.4 percent spending increase over the current fiscal year. That would include some funding for child care, which Reynolds said is the “next workforce issue we need to tackle.”

She is proposing first expanding early childhood tax credits to families making up to $90,000 a year. Right now, they apply to families making $45,000 or less.

“Second, we must begin to address the child-care cliff so that we are not punishing parents as they continue on a path to self-sufficiency,” Reynolds said. “To do this, we should implement a tiered co-pay system that doesn’t punish those who work hard enough to earn a raise.”

Her staff said that would take about $600,000 in the next fiscal year, and the amount would increase in future years.

Reynolds is asking lawmakers to increase oversight of Iowa’s professional licensing system, as well. And she wants them to establish a uniform standard for handling license applicants with criminal convictions, a recommendation that came out of her criminal justice reform committee.

Senate President Schneider said he was glad to hear Reynolds prioritize these issues.

“I like the fact that she’s giving us a lot to do,” Schneider said. “We’re here to do a job. There are a lot of challenges that we face. And just because it’s an election year doesn’t mean we’re not going to get anything done.”

Amending the Iowa Constitution

Reynolds reaffirmed her support for two proposed constitutional amendments Tuesday.

One would state that the Iowa Constitution doesn’t protect a right to abortion. Anti-abortion rights groups have been pushing for it in response to an Iowa Supreme Court ruling that strengthened abortion rights protections in the state.

The other would automatically restore voting rights to Iowans with felony convictions who complete their sentence. It stalled in the Iowa Senate last year.

And just like last year, Iowa-Nebraska NAACP President Betty Andrews called for immediate action to restore felon voting rights.

“I’m so in favor of the constitutional amendment,” Andrews said. “I was just talking with a few of the representatives, talking about that could still be a six-year process. So we definitely favor an executive order.”

Reynolds has declined to take executive action on felon voting rights restoration.

Katarina Sostaric is IPR's State Government Reporter