The tax package Republican Gov. Kim Reynolds is calling the “Invest in Iowa Act” got its first statehouse hearing Wednesday, but the chair of the Senate subcommittee started the meeting by saying they would not take action on the bill.
“This is really our opportunity to hear from stakeholders—whether you’re for or against the bill—things we can do to make it better,” said Sen. Jake Chapman, R-Adel.
A wide range of groups expressed support for Reynolds’ tax proposal, as well as various concerns.
Her bill would raise the state sales tax 1 percent, with three-eighths of that revenue going to a voter-approved natural resources trust fund. The rest would support further income tax cuts.
And the plan would shift 70 percent of mental health funding away from local property taxes and replace it with state funding.
The National Alliance on Mental Illness Iowa supports the plan, but is seeking an amendment so the mental health system could return to property tax funding if needed.
“We are concerned about imposing this very low cap on counties and then them not having any recourse if the state does not live up to their end of the bargain,” said Peggy Huppert, executive director of NAMI Iowa. She stressed that if mental health funding will be coming from the state, it needs to be protected.
Several health-related groups agreed with Huppert, and also asked that the mental health funding be distributed equitably across the state’s mental health regions.
Sales tax increase, income tax cuts
Business and tax groups praised Reynolds’ plan for further income tax cuts on top of those passed two years ago. The 2018 tax cuts have not been fully implemented yet.
“Overall, this bill does cut taxes,” said Victoria Sinclair, a lobbyist with Iowans for Tax Relief. “Yes, it increases the sales tax, but it decreases income and property taxes in the process, and it is overall a net tax cut.”
But many business groups urged lawmakers to consider lowering corporate taxes.
“We would like to continue the conversation on the corporate side of things,” said Joe Murphy, executive director of the Iowa Business Council. “Iowa is still ranked quite poorly with respect to the overall corporate tax rate.”
Lobbyist Tom Chapman said the Iowa Catholic Conference said positive aspects of the bill include expanding eligibility for child care tax credits, and exempting diapers and feminine products from the sales tax.
He had one main concern.
“The sales tax increase is going to fall more heavily on lower income people,” Chapman said. “They pay a greater percentage of their income in sales tax than higher income people do. From Catholic social teaching, we support a more progressive form of taxation.”
Natural resources trust fund
Ten years ago, Iowa voters approved a three-eighths of a cent sales tax increase for the Natural Resources and Outdoor Recreation Trust Fund, but it was never implemented.
Reynolds’ plan would fund the trust, while changing the funding allocation formula.
Several conservation and business groups voiced support.
Richard Leopold, speaking on behalf of the Iowa county conservation system, said it would provide significant and sustainable funding.
“Normally we beg for the crumbs that fall off the table,” Leopold said. “This puts us firmly at the table in being able to deal realistically with water quality, natural resources, economic development, [and] recreation issues.”
Dustin Miller with the Iowa Chamber Alliance said funding natural resources and recreation has the potential to help with the state’s workforce shortage.
“One of the ways to attract talent to the state is to provide resources for place-making and making attractive places people want to come to,” Miller said.
But some environmental groups have concerns.
“It relies heavily on the nutrient reduction strategy, and yet there is no way to measure whether or not the projects that are being funded by this are going to be successful,” said Pam Mackey-Taylor with the Sierra Club.
She said she is also concerned about the emphasis placed on economic development because she thinks other goals like protecting endangered species would be less likely to receive funding.
It’s still not clear if Republican leaders in the House and Senate intend to advance Reynolds’ bill.