Governor’s Invest in Iowa plan approaches 2021 session facing bipartisan opposition
The Mississippi River, shown here in Dubuque, is among Iowa waterways with significant pollution. (Photo by Perry Beeman/Iowa Capital Dispatch)
Landmark legislation intended to improve Iowa’s mental health programs and turn Iowa’s waterways into huge draws for recreation faces tough sailing in both parties, key lawmakers told the Greater Des Moines Partnership Thursday.
Gov. Kim Reynolds repeatedly has said she will resubmit the Invest in Iowa Act in one form or another. The $540 million package, which relied on a proposed one-cent sales tax increase for funding, was sidelined last session when the coronavirus pandemic forced an abbreviated session.
Lawmakers said the challenges in passing the bill — one of the most comprehensive packages ever proposed to address mental health, outdoor recreation, conservation and water quality — are significant.
The proposal, which trades a sales tax increase for offsetting cuts in income and property taxes, received a lukewarm reception from Republican leaders who run the House and Senate from the start last session. Democrats, including Sen. Joe Bolkcom of Iowa City, blasted the bill for using a regressive tax that would hurt low-income families to offer income tax breaks that would benefit wealthy people the most.
Environmental groups, some agricultural organizations, and mental health advocates supported Reynolds’ plan last session. One of the centerpieces of the act is funding for the Iowa Natural Resources and Outdoor Recreation Trust Fund, approved overwhelming by voters in 2010, which relies on approval of a sales tax increase.
House Speaker Pat Grassley, R-New Hartford, on Thursday said the sheer complexity of the bill worked against it in the most recent session. That might be a factor this year, too, he said.
Last session, there was talk of splitting the legislation into pieces, a move Reynolds opposed.
“We haven’t seen what the final plan may look like” for the 2021 session, Grassley said. “There are so many moving pieces I’m hesitant to comment until what the final package looks like.”
“It is a time-consuming piece of legislation and probably one of the the most complex from the standpoint of touching on priority issues from Iowans and within the Legislature,” Grassley said.
Sen. Dan Dawson, R-Council Bluffs, chairman of the Senate Ways and Means Committee, said many lawmakers, especially Republicans, remain opposed to a sales tax increase even with offsetting cuts in other taxes. Part of the problem is the sales tax increase would make Iowa — already seen as having relatively high taxes — less competitive against bordering states with lower sales taxes, Dawson said.
“There’s a lot of things my colleagues can support,” including the trust fund, lowering income taxes and shifting the costs of mental health services from county property taxes to other funding, Dawson said.
But paying for the bill has been a problem, Dawson added. “The thing that could probably cause the biggest consternation with us and it will continue going forward is actually raising the sales tax the penny,” Dawson said. “We would like to achieve broad-based tax reform. That’s more streamlining of our code and getting rid of some of the exemptions and making it more fair for everyone.”
Instead of a sales tax increase, Dawson said, Republicans would like to get rid of some tax breaks and consider other funding sources, while leaving the state sales tax at 6%. Many communities have higher overall sales taxes due to local option sales taxes.
Sen. Zach Wahls of Coralville, Senate Democratic leader, said the first vote he cast as a citizen was for the natural resources and recreation trust fund. He had turned the ballot over to mark that item before turning to various races.
When Reynolds included the conservation and recreation trust fund in her proposal — guaranteeing the most serious discussion of the issue yet — Democrats took note, Wahls said. But Reynolds’ proposal drew opposition.
“I think a lot of us on the Democratic side of the aisle were very excited about the prospect of (the trust) finally getting funded,” he said.
But Democratic lawmakers objected to a change in the formula for spending the sales tax on environmental and recreational efforts that differs from what was offered for voters’ approval in 2010. The Democrats also opposed using a regressive tax increase to fund tax cuts, Wahls said.
Reynolds had proposed exempting additional items from the sales tax to help low-income families.
“I wouldn’t say anything is off the table completely,” Wahls said. “But I think the governor’s plan as written last year would be a pretty hard sell and in our caucus we’d have some really serious concerns and we want to see some changes heading into 2021,” he added.
Reynolds’ spokesman Pat Garrett said the governor will share details of her plans for Invest in Iowa during her Condition of the State address. “The governor is committed to the legislation in general,” Garrett said.
Rep. Jennifer Konfrst, D-Windsor Heights, said she also is waiting for details. “There are some concerns going into it, for sure,” said Konfrst, a Democratic leader in the Senate.
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