It contributes little to the state budget. No tax would attract business.

Former Mason City Mayor Roger Bang called recently with a “what-if” question about Iowa’s corporate income tax.

Eliminating that tax is something Des Moines accountant Joe Kristan and others have been pushing behind the scenes in recent months, but with little headway.

I told Bang there was zero chance of the Legislature eliminating the tax this year, so most people don’t care what would happen. He agreed, but said people should start thinking about it anyway.

Kristan, who writes a tax blog for Roth & Co., has a rationale for eliminating the tax. It goes like this: The corporate income tax is not a big income producer. It is expensive to administer. Also, Iowa’s high tax rate discourages new businesses from locating in the state.

So, why not get rid of it?

One reason, he admitted, is that too many businesses with highly paid lobbyists benefit from the complicated network of tax credits that has grown over the years to mitigate the cost of the tax.
As things stand today, many businesses can all but wipe out their Iowa tax bill with credits. Some big businesses even get money back from credits that are refundable, such as the research and development credit.

The credits have been around so long that they are part of the business model at many companies.

To give an idea of how out of whack the system is, Kristan points to Iowa’s official 2010 budget.

The budget projects that businesses will pay $341 million in corporate income taxes this year. It also shows they’ll get back a little more than half that in refunds, leaving the state with net corporate tax receipts of $165 million.
That may sound like a lot, but it’s only 3 percent of the $5.4 billion available for state government services.

The bulk of the state’s net income comes from personal income taxes, $2.55 billion, and sales and use taxes, $2.15 billion.

Sin taxes on alcohol and tobacco sales generate nearly twice as much net income – $321 million – as the corporate income tax.

Another problem with the corporate income tax, Iowa State University economist David Swenson said, is that “it fluctuates a lot.”
In fact, this year’s net take from the tax – after refunds have been paid – is less than half the net collected two years ago in the fiscal year that ended June 30, 2008, right before the economy went bad.

That’s a huge drop, and it makes planning difficult.

By comparison, the combined drop in personal income, sales and use tax receipts was 2.2 percent.

There’s also a fairness issue, Swenson said.

Several companies that employ thousands of Iowans already don’t pay Iowa income tax, or pay very little tax, because the bulk of their sales are outside Iowa and profits from those sales are not subject to Iowa income tax.
That’s on top of the taxes that aren’t being paid because of credits.

As a result of the ongoing film tax credit scandal, lawmakers are looking at capping or eliminating several of Iowa’s 35 existing tax credits.

That’s fine because the state needs to keep a better handle on tax credits than it has in the past.

Swenson said: Tax credits should be “straight forward practical assistance to firms that knock off the rough edges associated with business start-ups.”
But, he said, “you don’t want to underwrite them” to the point where the state provides an unfair competitive advantage.

When lawmakers start playing around with the tax code, it’s easy to create distortions because one taxpayer’s gain is another’s loss.

Don’t expect any meaningful change this year, because lawmakers don’t have the time to fully explore Kristan’s proposal for eliminating the corporate income tax. But it is definitely worth looking into after the session.
Even Kristan can’t fully defend his proposal. He admitted there are too many unknowns.

But it stands to reason, he said, that if the corporate income tax is eliminated, or even severely reduced, Iowa will gain a competitive advantage over surrounding states in attracting business.

Right now, Iowa’s top corporate tax rate, 12 percent, is higher than any surrounding state.

Few businesses actually pay that rate because of all the credits and other loopholes.
There are obvious advantages in having a corporate tax code that is easier to understand and apply.

Between now and next January when the Legislature returns, somebody needs to do the math and figure out a cleaner system than the one we have now.

Most business leaders believe that a consistently low – or no – corporate tax rate is attractive to new businesses and economic growth.

If that’s true, put a number on it.

And if you don’t believe it’s true, accountant Tom Pflanz of McGowen Hurst Clark and Smith in West Des Moines said, then why have so many businesses in Sioux City moved across the river to South Dakota, where there is no income tax?

(Source: The Des Moines Register)

Democrats, who control both houses of the Iowa Legislature, are again moving ahead with a labor-backed measure that failed last year. While it remains unclear if the proposal will fare any better in the current session, passage, in our view, poses threats to both the current recovery and to future economic development.

The House Labor Committee crafted and approved a new version of the so-called fair share legislation last week that would allow unions to collect a fee from workers in a bargaining unit who haven’t joined the union. Minority Republicans, joined by some moderate Democrats, mustered enough votes last year to block the measure.

“I wouldn’t want to speculate at this point because we really don’t know,” House Speaker Pat Murphy, D-Dubuque, told the Associated Press. “We haven’t reached a consensus yet.” Compared to a year ago, the fair share bill has been watered down to make it more palatable to Democrats whose opposition was key to the bill’s defeat during the last legislative session.The new fair share plan would apply only to the largest union representing state workers, the American Federation of State, County and Municipal Employees.

“It’s a much smaller measure,” said Sen. Tom Courtney, D-Burlington, a backer of fair share.

Still, the Labor Committee had to work more than four hours this week before approving the fair share plan, and critics demanded a public hearing to vent their views that the proposal guts the state’s labor laws. That hearing will be this week.

Despite changes to the bills, they still face unanimous opposition by Republicans, and the moderate Democrats who rejected them last year don’t seem eager to change their stand.

Republicans are focusing plenty of attention on the measures, saying they would end Iowa’s status as a right-to-work state, where workers can’t be forced to join a union as a condition of employment.

“It’s absolutely a repeal of Iowa right to work, and it’s absolutely the wrong way to go,” said House Minority Leader Kraig Paulsen, R-Hiawatha.

First enacted in 1947 as an outgrowth of the Taft-Hartley Act that was enacted the same year over President Harry S. Truman’s veto, Iowa’s right to work statute has ensured that workers who choose not to join a union cannot be forced to do so as a condition of employment.

Paulsen argued that backers are desperate to find some way to get the measures to Gov. Chet Culver, who indicated last year he would sign such legislation.

Others accused Democrats of grandstanding on the labor issues to court organized labor in an election year.

“It’s political payback. We all know that,” said Rep. Lance Horbach, R-Tama, a leading critic of the fair share measure.

Approval of fair share legislation would, in our opinion, provide a compelling reason for companies to bypass Iowa and look elsewhere to build manufacturing plants, warehouses and corporate offices. This consideration is critical to western Iowa as both Nebraska and South Dakota have right to work laws.

(Source: Council Bluffs Daily Nonpareil)

“The bottom line for Iowa is this: In the best-case scenario, it won’t make any difference. In the worst case, it’s going to make things worse.”

You can view where the money is going by clicking here: I-JOBS road funding amounts and bridge projects. One thing to note is that according to the Iowa Department of Transportation’s 2008 Factbook, it costs $3.2 million for a mile of new two lane highway. None of cities or counties receiving funding will receive that much for roads according to the documents released by the Governor.

Also worth noting is cities hit hard by job losses aren’t being targeted by the I-Jobs program. Ottumwa which has experienced 700 lay-offs at John Deere is receiving $242,226 or $346 for each job lost. Webster City which experienced 150 layoffs at Electrolux is receiving $79,220 or $528 for each job lost.

• On March 10th, House Republicans attempted to add the budget transparency bill to a piece of legislation that created a lean enterprise office within the Department Management. The amendment was ruled out of order. Here is the vote to add the transparency bill: H-1108, March 10, 2009, House Journal Page 728.
• On April 23rd, after the transparency language had been added to a larger budget bill, House Democrats voted to strip it out. Here is that vote: House File 809, April 23, 2009, House Journal Page 1666.
• As part of House Republicans effort to make the state budget transparent and easily searchable to Iowans, an amendment was offered to make a searchable budget database available on January 1, 2010. The actual language of the transparency bill made the searchable budget database available on January 1, 2011. A date which falls after the 2010 election. House Republicans saw no reason to keep the information from the public until 2011. You can find that vote here: H-1270, March 24, 2009, House Journal Page 1010.
• Today’s Register also has an article detailing the pay increase state employee’s will receive despite claims that a pay freeze was implemented. To avoid confusion over the compensation package the state employee’s union negotiates with the state, House Republicans offered an amendment that required costs associated with the collective bargaining agreement to be included in any searchable budget database. The amendment was defeated by House Democrats. You can find that vote here: H-1266, March 24, 2009, House Journal Page 1011.

Florida is just one of many states engaging in this type of transparency. Unfortunately, Iowa isn’t one of them. House Republicans pushed through HF 801, the Transparency Bill, this past session which created a searchable budget database for taxpayers. The bill died in the Senate.

Republicans added the transparency requirements into another bill but it was stripped out by House Democrats in the closing hours of the session. A vote for the amendment was a vote for removing the transparency language from the bill.

The vote for House Amendment H-1662 to HF 809, can be found here: 04-23-09, House Journal page 1666.

Since I was a teenager my dad has said – “Nothing Good Ever Happens After Midnight!”

What is true for a teenager is also true for the legislature – and last night was again proof that nothing good happens after midnight at the Capitol.

Early this morning, between midnight and 4:21 am (when the legislature adjourned) the Majority Party Democrats caught Iowans sleeping – literally.

After working for fifteen weeks in secret meetings on the budget, the Majority Democrats rolled out the final four components of the state budget on Friday evening – the Standings Appropriation Bill, the Bonding Plan, the Rebuild Iowa Infrastructure Budget, and the plan to spend the Federal Stimulus Funds.

Bottom line – despite the worst economy in generations – the state of Iowa will spend more money next year – $6.3 billion – than in any year in our history (according to the non-partisan Legislative Service Agency).
In addition, after months of closed door meetings with no public input, the Majority Democrats rolled out a plan to spend $1.6 billion over the next 20/30 years by borrowing $765 million to spend now.

That is right – we are going to pay $899 million of interest/costs for 20 years so we can borrow and spend $750 million. The debt payments will be made from gambling revenue ($50 million a year) that is supposed to be dedicated to infrastructure projects.

We are not able to ‘pay-as-you-go’ for these projects because the majority party raids the Rebuild Iowa Infrastructure Fund (gambling revenues) by spending 75% of the money on ‘pork projects’ and unauthorized spending on non-infrastructure expenses.

And the use of committed funds, one time cash reserve, and federal stimulus money will create an $890 million gap between revenue and spending for the next legislative session.

Iowans should be outraged – because while you were sleeping – nothing good happened after midnight.

On Sunday, April 5, the Des Moines Register released a new poll of Iowans. The poll finds the public sides with House Republicans on labor issues as well the relationship between employers and employees.

The poll asked 800 Iowans if they supported “Setting minimum pay and benefit standards for works on government building projects” (prevailing wage) and the result was 41 percent for, 50 percent against and only 9 percent not sure. This is surprising because it doesn’t mention the potential impact being the increase of property taxes or that fewer projects may be undertaken.

On the question “Should unions be allowed to charge non-union employees for the services they receive?” the result was more lopsided, with only 28 percent for and 66 percent against. It is clear that the public opposes the Democrats’ plan to dismantle the Right to Work law.

The next question was “Are labor unions in Iowa, if anything, too powerful or not powerful enough?” 46 percent said the unions were too powerful while only 38 percent said not powerful enough. Obviously the public understands that the unions help elect Democrats and now have too much power.

The poll followed with a question about employers. “Do employers generally have too much power over workers and frequently take unfair advantage, or do employers generally treat workers reasonably?” Only 33 percent said employers take unfair advantage while 62 percent said employers treat employees reasonably well. This is proof that the unions are a solution in search of a problem that does not exist.

Finally, the poll asked “Which do you think is better for Iowa? Raise the average wage even if it means some jobs are lost or encourage more jobs, even if wages are lower than the national average?” The result was overwhelming with only 28 percent saying raise wages while 65 percent said encourage job growth even if they are lower wage jobs. Once again, this is a repudiation of union propaganda.

(Note: All information for this article came from the Des Moines Register, April 5, 2009 edition)

House Republicans will continue to stand with Iowans and oppose legislation that threatens to increase the unemployment rate while doing nothing to help the 80,000 Iowans currently out of work.

On Governor Culver’s $750 Million bonding plan:

Fewer than a quarter of Iowans say it is better to borrow the money, while 71 percent say it is better to pay as the state has the money over time.

On the issue of Fair Share:

By more than 2 to 1, Iowans say they are opposed to a bill that would allow unions to charge nonunion employees for services they receive from the union

On Prevailing Wage:

Fifty percent of Iowans say they oppose a measure to set minimum pay and benefits for workers on government construction projects. Forty-one percent favor the measure that supporters call the “prevailing wage” proposal.

The full article and poll results can be found here (Des Moines Register)

For PDF version of the poll results, click here.

Struyk, along with a handful of Republican legislators, has proposed a bill requiring the state to create a searchable, consolidated, online database of the state’s budget and spending report, free of charge and open to the public.

“It’s an information age. People want to be able get on the Internet and see what’s being spent and where. I think it’s a great way to keep government spending in check and keep the populace educated as to what government’s doing with their tax dollars,” he said.

At least 10 other states — Colorado, Hawaii, Idaho, Illinois, Montana, Ohio, Oregon, Pennsylvania, Virginia, and Wyoming — are considering or recently have considered legislation to create online budget and spending databases.

Click here to read the full article

What does the Muscatine High School Student Council have in common with the Iowa Legislature?

Both taught their superiors a lesson Monday about bullying.

Kudos go to the students. For MHS teachers and administrators, the students conducted a dress rehearsal of an anti-bullying presentation. MHS seniors Taylor Wettach and Jasmine Brent, sophomores Dawn Eichelberger and Giles Joslyn, and freshmen Tony Vo and Sierra Sagastume asked the staff to break into groups and participate in some activities that focused on including others.

They will make their presentation for real this weekend in Chicago at the Leadership Experience and Development Conference for the National Association of Student Councils student leaders and advisers.

It’s too bad Pat Murphy, a Dubuque Democrat and Speaker of the Iowa House of Representatives, missed the students’ presentation.

Hearing it might have spared him from the egg he found on his face over a union-backed prevailing wage bill. The bill would have set standards for minimum pay and benefits on government projects.

After failing to pass the bill last week, Murphy kept voting machines in the Democratic-controlled House open from about 6 p.m. Friday until 1 p.m. Monday. His goal was to persuade — a nice, political term for bully — at least one of five Democrats who had voted against the bill to change his or her vote.

It didn’t work. And with the vote remaining 50-48 Monday afternoon, House Majority Leader Kevin McCarthy, D-Des Moines, flipped his vote and filed a motion to reconsider. That procedural move will keep the prevailing wage issue eligible for consideration later again in this session. And Murphy says he still intends to pass the bill.

If the bill was meant to become law, we’re not sure all of this maneuvering would be necessary. And we’re concerned about what this bill could do to the cost of providing government services at a time when property tax valuations — which fund local government coffers — are beginning to cool because of the sluggish economy.

We urge leaders in the Iowa Legislature to move on to other issues that are more important to the majority of Iowans. And then they’ll want to brace themselves for some more bullying, which is sure to come from the labor organizations that helped put the legislative Democrats in charge.

Source: Muscatine Journal