Stakeholders lined up in a State Capitol conference room on Wednesday to sing the praises of Gov. Kim Reynolds’ proposal to raise Iowa’s sales tax to pay for environmental programs, mental health services and reductions in income and property taxes.
Lawmakers, however, aren’t yet tuning up to advance the legislation. A Senate subcommittee heard public comment about Senate Study Bill 3116, otherwise known as the Invest in Iowa Act. But it has not yet advanced the bill to the Senate Ways and Means Committee for debate.
The Republican chairman of the Senate’s tax-writing Ways and Means Committee, Sen. Jake Chapman of Adel, said there may be a second subcommittee meeting. He noted that some groups raised concerns but noted, “Overall, it appears the stakeholders are very supportive of what the governor proposed.”
That doesn’t change the fact that many Republican lawmakers have issues with the bill, he agreed. “Our caucus has made it very clear that we want to see deep tax cuts,” he said. “… But we also recognize that these aren’t just priorities of the governor, these are priorities of Iowans.”
Sen. Joe Bolkcom, D-Iowa City, offered what may have been the most negative assessment of the proposal during the meeting. “This turnout demonstrates extraordinary demand and need for more investments in mental health and our environmental programs,” he said.
But he questioned where the money was coming from to pay for these programs given the governor’s insistence that tax revenue will be lower overall. “We’re looking at a massive tax shift as we raise a regressive sales tax $540 million and see this major income-tax cut,” Bolkcom said.
While some interest groups, including the Iowa Farm Bureau Federation, said they were undecided about the legislation, or they expressed some concerns, a few outright opposed it.
Some mental health advocates urged approval of the bill, which they said would provide a critically needed sustainable funding source for regional and children’s mental health programs. Under the bill, the state would take over about 70 percent of the estimated $135 million in mental health costs. The bill would also reduce the cap on the property tax levy counties use for mental health programs from $47.28 per capita to $12.50.
Some mental health advocates and groups said, however, they didn’t trust the state to keep its promise. They asked for the ability to raise property taxes if the state doesn’t maintain its commitment. “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,” Peggy Huppert, executive director of NAMI Iowa said during the subcommittee meeting.
Environmental, agricultural and outdoor recreation groups also praised the legislation as being a significant step forward in addressing Iowa’s water quality needs, as well as creating a sustainable source of money for outdoor recreation. Some outdoor advocates, including members of the Sierra Club, said the governor’s plan deviates too much from the funding formula in place a decade ago when voters agreed to direct a portion of any sales tax increase to water quality and outdoor recreation.
Business groups were enthusiastic about the prospect of tax cuts in the bill, which they said were needed to make Iowa more competitive with other states and help attract workforce.
“From a competitive tax standpoint, this bill on the individual side will dramatically improve Iowa’s standing nationally as scored by the nonpartisan Tax Foundation,” Joe Murphy of the Iowa Business Council said, adding that the bill’s expansion of child-care tax credits is “extremely important” to address workforce needs.
No business group said the proposed income-tax cuts were not significant enough. The Iowa Taxpayers Association asked for inclusion of businesses organized as C corporations, and Iowa Business Council also asked for tax relief for corporate taxpayers. Editor’s note: This story was updated to include the Iowa Business Council’s request for corporate tax relief.