Majority House Republicans are pushing ahead with plans to return much of the Iowa state budget surplus via a $369 tax credit for eligible state income taxpayers.
House File 1, which cleared a Ways and Means subcommittee on a 3-2 party-line vote Wednesday, would redistribute up to $570 million of a projected $790 million surplus to a large share of the 2.1 million Iowans who will file state returns next year on income they are earning in 2013.
“This is a way for an overpayment of tax dollars to go back to Iowans,” said Rep. Peter Cownie, R-West Des Moines, who chaired the House panel.
Not everyone agreed Wednesday with returning the surplus to Iowans in the form of a $369 tax credit per eligible individual, arguing that the state has gone through some lean budget years and built up surplus money by underfunding priority programs and services.
“They need to be reinvested, not just handed out,” said Huxley resident Brenda Brink, a member of Iowa Citizens for Community Improvement (CCI).
“This isn’t a bank or a business where we overcharged you and we’re going to give you your money back as a handout,” Brink said. “People don’t feel entitled to that. They want an improved Iowa and the only way to make Iowa a good state and attract other people is to improve the services. That’s where we need to be focusing and not on handouts.”
Cownie countered that Iowa has seen robust revenue growth at a time when lawmakers and Gov. Terry Branstad have made prudent spending decisions compared to other states and the debt-ridden federal government.
“Our economy is doing quite well,” said Cownie. “Frankly, this is a really good problem.”
Lindsay McQuarry of Muscatine-based Iowans for Tax Relief spoke in favor of the tax credit, saying “We believe that this bill returns money to the taxpayer as it should and as it’s supposed to be.”
CCI member Ken Bowen of West Des Moines said he would like to see the state commit more resources to cleaning up the environment.
“While the money would be nice to have a one-time check, I would rather have clean water in my state,” he said. “I want to be able to take my grandchildren swimming without having to see a sign that says enter at your own risk.”
State officials project that about 30 percent of the 2.1 million state income tax filers wouldn’t take advantage of the new credit which would show up as a new line item on state returns that would allow taxpayers to lower the tax liability by $369 or boost their state refund by that amount. Couples filing jointly would be eligible for tax relief totaling $738.
Rep. Sally Stutsman, D-Riverside, said the state’s surplus position offered “a great opportunity” to invest in one-time needs such as critical road and bridge repairs and upgrades or aiding in the redesign of the county-based mental health system into a regional service delivery network.
“It just seems to me that when we have an excess in funding that we ought to apply it to things that we cut back on in past years,” added Rep. Jerry Kearns, D-Keokuk, who joined Stutsman in opposing H.F. 1. “When we’ve got excess balances then we ought to replenish those things as much as we can. There are a lot of things that are suffering.”
Majority Democrats in the Iowa Senate and Gov. Terry Branstad have indicated they support using part of the state’s projected surplus to deliver property tax relief this session.