If you remember nothing else about Senate File 295 know this: It’s the biggest tax cut in Iowa history.
One after another, that’s the point Gov. Terry Branstad and other speakers drove home Wednesday at a bill-signing ceremony for the wide-ranging bill that provides tax relief to all classes of Iowa property — agricultural, residential, commercial and industrial – as well as breaks to Iowa income taxpayers.
Branstad followed his lieutenant governor, Kim Reynolds, House Speaker Kraig Paulsen and Senate Majority Leader Mike Gronstal to the microphone so the magnitude of the tax cut was old news before it was his turn to brag about the capstone of the 2013 legislative session.
However, that didn’t stop the governor, who called the bill the “beginning of correcting a long, long ago mistake.”
“As you’ve already heard, this is the largest tax cut on Iowa history and (the property tax) is the most unpopular tax that we have,” Branstad said.
The bill, which was approved 43-6 in the Democratic-controlled Senate and 84-13 in GOP-controlled House, is projected to provide $4.4 billion in property tax relief over 10 years as well as $90 million a year in income tax savings.
SF 295 includes a 10 percent roll-back on commercial property tax rates over the next two years and a tax credit for commercial property owners. A new class of property – multi-residential — will eventually result in taxes on apartment buildings, for example, being cut in half. SF 295 also returns some of the state surplus — what Republicans call a “taxpayer overpayment” — to income taxpayers in the form of a tax credit worth about $60 per taxpayer next year. Lawmakers also doubled the Earned Income Tax Credit for low-income working Iowans from 7 percent to 14 percent next year and to 15 percent the following year.
Despite the lopsided margins, reaching a consensus – even on tax relief – has taken decades, according to Gronstal and Paulsen.
“The enemy of doing something on commercial property tax relief in this state has been people saying, ‘Well, that’s not good enough,’” Gronstal said.
“I’m proud to say that this year we finally put that argument aside and said ‘Let’s agree on a tax cut that is big and bold and good for every employer in the state of Iowa,’” the Council Bluffs Democrat said.
Although there were accolades for Gronstal and Paulsen for their patience and perseverance to sell the tax relief package to their members, Paulsen said the credit should go to Iowa voters.
“The Iowa Legislature is still a legislative body that Iowans can move and influence,” the Hiawatha Republican said. “This bill is an example of Iowans telling us, ‘We’re tired of politicians talking about doing property taxes. We want something done.’”
It was a long and hard battle – and not just this year, Branstad said.
“This was 35 years in the making,” Branstad said, recalling he was on the House Ways and Means Committee in the 1970s when changes were made to tie agriculture land and residential property values to avoid a tax shift from one class to another. The mistake was not tying them to commercial and industrial.
“This is the beginning of correcting a long, long ago mistake,” the five-term Republican governor said.
Although lawmakers have been working on property tax relief for several years, floor manager Sen. Matt McCoy, D-Des Moines, said it helped that this year the state coffers are flush. Iowa is projected to end the current fiscal year with a $647 million surplus ending balance in addition to $622 million in the cash reserve and economic emergency accounts they are required by law to fund.
He joked that Sen. Wally Horn, D-Cedar Rapids, the longest-serving member of the Legislature, told him that tax cuts should be approved in election years.
“I say we do it when we have the revenue and the will,” McCoy said after the bill-signing. “Then you hope for the best.”
Hawkeye Ready-Mix President Jim Sauter of Cedar Rapids is optimistic, too.
“The biggest thing right away is lower taxes,” he said, referring to the 10 percent tax cut over two years. “We’ll notice the difference.”
However, for a business highly dependent on new construction, Sauter said it may be more important that the tax changes will encourage more businesses coming to Iowa and more businesses investing in Iowa.
It was not by chance that Branstad came to Hiawatha for the bill signing. Not only is it the home turf for Paulsen, who may run for an open U.S. House 1st District seat in 2014, but Sauter and his brother-in-law, Charlie Rohde of Cedar Rapids, whose family owns the company, are contributors to both Paulsen and Branstad. According to state campaign finance reports, Rohde has contributed at least $11,000 to the Branstad campaign, at least $1,250 to Paulsen and more to Republican-leaning groups. Sauter has given at least $2,250 to Paulsen.
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Highlights of the plan include: