Reynolds will have to fight GOP for sales tax plan

Iowa Gov. Kim Reynold's delivers her 2020 Condition of the State Address in front of the Iowa legislature on Jan. 14. (Photo by Linh Ta/Iowa Capital Dispatch)

The centerpiece of Iowa Gov. Kim Reynolds’ 2020 legislative agenda — a water-quality and mental-health funding scheme and income tax cut driven by a 1-cent sales tax increase — seems to be bogged down in the GOP-controlled House and Senate.

The question is: How hard is the governor willing to fight for her plan?

Differences in philosophy and priority among Republican legislators and the GOP governor have been on the back burner.  Lawmakers were busy pushing policy bills ahead of last week’s committee deadline. But now, the focus turns to crafting the state’s $7.5 billion budget, and differences over spending and tax issues will come to the forefront.

Senate Republicans want to be more aggressive than Reynolds was on cutting taxes, Sen. Jake Chapman, chairman of the tax-writing Senate Ways and Means Committee said in an interview.

“I don’t think it moves the ball far enough in keeping us competitive,” Chapman, R-Adel, said.

The governor’s plan proposes a net tax savings of about $7 million, when her proposed one-cent sales tax increase is offset with cuts on income and property taxes and other taxes. That’s not enough for legislative Republicans, Chapman says.

“This is a caucus who put forward a billion-dollar tax cut a couple of years ago and so obviously our position is we want to make sure Iowans are receiving more money in their pockets,” he said.

If that were the only problem, GOP lawmakers could just try to negotiate with Reynolds for a larger tax cut.  But the only part of the bill that seems to have strong GOP consensus is Reynolds’ proposal to inject more state dollars into the regional mental health system and reduce the property tax burden for those programs.

“We think the mental health piece is possible with or without the entire package,” Senate Majority Leader Jack Whitver, R-Ankeny said.

The state has $250 million set aside in a taxpayer trust fund that must be used on tax relief, in addition to $800 million in state reserve funds and a $450 million state budget surplus, he said.

Rep. Pat Grassley, R-New Hartford, is speaker-select of the Iowa House.

House Speaker Pat Grassley, R-New Hartford, said it’s also important for House Republicans to find money for mental health.

But, he said, “I don’t think it’s as simple as just moving a simple tax bill forward because of all of the connectivity that happens within the bill.”

The third leg of this wobbly stool is the Iowa Water and Land Legacy or IWILL. This program is the main reason for Reynolds to include any sort of sales-tax increase in her plan.  Under the constitutional amendment approved 10 years ago, Iowans agreed to set aside the first three-eighths of one percent of any future sales tax increase for water quality and outdoor recreation programs.

Reynolds’ proposal does that, but there are disagreements among GOP lawmakers about how that money should be spent. And it’s an open question whether any additional money would go toward water quality if lawmakers don’t go along with a sales tax increase.

Iowa Senate Majority Leader Jack Whitver, R-Ankeny

“To be determined,” Whitver said.

Reynolds said Friday she’s not backing down on any elements of her plan.  But, so far, she’s not suggesting she would veto legislation that, for example, funds mental health but leaves IWILL behind.

Asked how she would persuade her GOP colleagues to support a sales tax increase that clearly is controversial in the caucus, Reynolds said, “I’m going to work on it but I think Iowans are ultimately going to be the ones to convince them to do it.”

The governor has been scheduling town hall meetings around the state to explain her proposal to Iowans and drum up public support.

“What I think has been beneficial about holding the town halls is to really walk through all of the big things and priorities that we’re able to address, whether it’s fully funding our mental health system and reducing the burden on property taxpayers or really putting significant long-term and growing revenue into water quality, conservation and outdoor recreation,” she said during the taping of “Iowa Press” at Iowa PBS.

Reynolds already has public opinion on her side for some of the plan’s major elements.  A 2017 Des Moines Register/Mediacom Iowa Poll found that two-thirds of Iowans support a penny sales tax increase to pay for water quality and mental health.

Some of the GOP obsession with tax cuts undermines the important goals for these plans. It’s questionable, for example, that replacing a major share of property taxes with state money for mental health would create the stable, sustainable source of money that these vital programs need.

Even so, Reynolds has shown she’s willing to stick her neck out to address serious problems that affect the lives and health of a significant number of Iowans.  GOP lawmakers have yet to offer a better idea.  Iowans who want to see action on this legislation this year should let their local lawmakers know, and soon.