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Democrats Vs. Branstad Over Tax Cut

Joyce Russell/IPR
Iowa Department of Revenue official Victoria Daniels.

There was emotional testimony today before a legislative committee over a new tax break for Iowa manufacturers which Democrats say the legislature should have signed off on.   

The Branstad administration proposes a sales tax exemption on more of the supplies manufacturers purchase, from drill bits to lubricants and coolants, and from saw blades to air filters and hydraulic fluids. 

Taxes are levied on finished products, and companies say also taxing the items they need for manufacturing amounts to a double tax.

Spokeswoman Victoria Daniels says the Iowa Department of Revenue is proposing the change at the request of the Iowa Taxpayers Association:

“The existing rules no longer reflect the reality of manufacturing in Iowa,” Daniels says.   

Critics object to the estimated 46-million cost of the tax break, given Governor Branstad’s vetoes of education funding this year.   Several school officials went before the Administrative Rules Review Committee to argue against the tax cut.

“This rule is an overreach, it's a bad precedent, and the Branstad administration should withdraw the rule,” says Iowa City Democratic Senator Joe Bolkcom. 

Bolkcom heads the Senate’s tax-writing Ways and Means Committee.   He says tax policy is the legislature’s job.

“This is an end run by the governor to get around us,” Bolkcom says.   “It's as simple as that.”

The DOR says the sales tax on manufacturing supplies results in hundreds of complaints every year.

“Fifteen percent deal with this issue of sales tax exemption,” Daniels says.

The non-partisan Legislative Services Agency questions the DOR’s estimate for the cost. 

The legislature has turned down similar changes in the past.  The DOR has agreed to delay implementation until July 1st so the legislature can stop it if they choose.

A public hearing will take place before the rule goes into effect.