Gov. Kim Reynolds has said she intends to ask lawmakers to consider her “Invest in Iowa” tax proposal again, or some version of it, during the 2021 legislative session. But top Republican and Democratic lawmakers are saying they are still not on board with parts of the original plan.
Reynolds, a Republican, unveiled the Invest in Iowa Act at the start of the 2020 legislative session.
It would raise the sales tax one cent, with three-eighths of a cent funding the Natural Resources and Outdoor Recreation Trust Fund that voters approved 10 years ago. Most of the remaining new revenue would support income tax cuts on top of those passed in 2018, though they have not been fully implemented and depend on sufficient state revenue growth.
Reynolds’ tax plan also proposed shifting about 70 percent of the costs of the county-funded mental health system to the state, leaving room for some reductions in property taxes.
Several interest groups—including mental health advocates, business-oriented organizations, and conservation groups expressed general support for the proposal, with some concerns and suggestions for changes.
As of early March, Republican leaders had never committed to passing the bill. Then, in mid-March, the coronavirus pandemic cut the session short. Lawmakers did not take any votes on Reynolds’ bill.
At recent legislative panels hosted by the Iowa Taxpayer’s Association and the Greater Des Moines Partnership, top lawmakers from both parties said they had concerns about Reynolds’ proposal.
“I think there’s a lot of things there that Senate Republicans are in agreement with and things that we want to work with [Reynolds] on,” said Sen. Dan Dawson, R-Council Bluffs, the new chair of the Senate Ways and Means Committee, which handles taxation. “The thing that probably caused the biggest consternation with us, and it will continue going forward, is actually raising the sales tax a penny.”
Dawson said it would make border communities, like his in Council Bluffs, less competitive.
Democrats have additional concerns about the sales tax increase.
“You’re talking about raising a sales tax that has a disproportionate impact on low income families…to try and offset more tax cuts for higher income folks,” said Senate Minority Leader Zach Wahls, D-Coralville. “I wouldn’t take anything off the table completely, but I think as the governor’s plan was written last year, it would be a pretty hard sell in our [Senate Democratic] caucus.”
House Speaker Pat Grassley, R-New Hartford, said he wants to wait and see what changes Reynolds may make to the Invest in Iowa Act. He said it touches on a wide range of priorities for lawmakers.
“I want everyone to be very mindful that a bill like this—regardless of what the governor comes up with, whether it has the support or doesn’t—it is a time consuming piece of legislation, and probably one of the most complex,” Grassley said.
House Minority Whip Jennifer Konfrst, D-Windsor Heights, said she is also waiting to see if the governor’s proposal changes in 2021.
“There are obviously concerns about equity and concerns about a lot of issues with regard to the final impact of all the pieces,” Konfrst said.
The 2021 legislative session is scheduled to begin Jan. 11, with Republicans in control of the Statehouse for the fifth year in a row.
