Democrats Introduce Bill for New Local Taxes

From this week’s House Republican Newsletter:

Legislative Preview: Democrats Introduce Measure to Create New Taxes

On March 17, 2009, Senate Ways and Means Chairman Joe Bolkcom (D-Iowa City) introduced Senate Study Bill 1308, legislation expanding cities and counties authority to impose various new taxes. This legislation is a result of the 2008 Legislative Property Tax Interim Study Committee’s meeting and final recommendations to the legislature, after a two year review of Iowa’s convoluted property tax system.

Proponents of the bill claim it will accomplish property tax relief. Others who are skeptical of the legislation believe it is nothing more than a shell game – increase taxes in one area to decrease in another. Moreover, opponents claim the legislation isn’t even neutral. In other words, not all of the new revenue raised by the increased taxing authority under the bill is required to go toward property tax relief.

The bill encompasses many of the ideas recommended by the Legislative Property Tax Study. For example, it establishes an “alternate revenue fund” which is essentially a storage unit for all the revenue cities and counties collect from the new taxes they’re allowed to impose under the bill. Of that fund, only 75% is designated to property tax relief.

Notable additional authority provided to cities and counties in SSB 1308 include:

  • Local Income Surtax – permits a 5% tax on the amount residents pay in state individual income taxes.
  • City Franchise Fees – permits a fee of 5% to be imposed on the gross revenue generated from the sales of a franchisee.
  • Entertainment Tax – permits a 5% tax on items associated with entertainment such as tickets to events and items sold at those events.
  • Tobacco Tax – permits additional taxes on tobacco products at a rate specified in increments of one or more full percentage points upon the sales price of products sold at the retail locations in the area.
  • Hotel/Motel Tax – permits an additional 6% tax on individuals who stay in a hotel or motel room.