DES MOINES — Senate Republicans are making a third try at accelerating state income tax cuts that were passed in 2018 subject to certain revenue “triggers.”
Along with that Senate GOP tax policy priority, Senate Study Bill 1269 — legis.iowa.gov/legislation/BillBook?ga=89&ba=SSB%201269 — which unanimously cleared the Senate Ways and Means Committee on Wednesday, incorporates parts of Gov. Kim Reynolds’ housing proposal.
It also shields federal forgivable PPP loans to Iowa businesses from state taxation, benefits small manufacturers and combines elements of other bills as lawmakers makes look to streamline the process of adjourning the 2021.
Committee chairman Sen. Dan Dawson, R-Council Bluffs, said the measure combined language from the governor’s housing bill and a separate economic development bill into “a proposal that can fit within our budget and meet some of our goals.”
The bill proposes to eliminate the income tax triggers and accelerate the reduction of tax rates and brackets slated to take effect in 2024 — to an effective date of Jan. 1, 2023.
Representatives of business, tax and housing organizations spoke in favor of the revised legislation, with Brad Hartkopf of the Iowa Association of Business & Industry telling Wednesday’s subcommittee hearing, “We think this bill will enhance Iowa’s business climate as well as the tax climate.”
However, Mike Owen of Common Good Iowa questioned the timing, with the state and nation still in the throes of a COVID-19 pandemic and additional uncertainty tied to federal rescue funding to states that carries stipulations the money not be used for tax relief.
“In short, what is the rush?” he said. “We know that it’s going to cost us $330 million to $350 million in federal COVID relief and the triggers have a good chance of being reached anyway, especially with the federal boost to the Iowa economy.”
“Those triggers offer some accountability that the Legislature demanded just to pass that income tax package, and they should be honored on that basis alone,” he added. “Why are we so determined to turn away something like $350 million in federal aid on top of that just to rush new income tax law into place, perhaps prematurely?”
Previously, Republicans who hold a 32-18 Senate majority sent two separate tax policy bills to the House that included elimination of the 2018 income tax triggers, but majority House Republicans have not taken up either measure at this point in the session.
The latest Senate package proposes to increase the tax credits under the Workforce Housing Tax Credit Program and addresses the backlog of housing projects awaiting support in large cities.
Next fiscal year, the bill provides a one-year, $15 million increase to the program’s allocation from $25 million to $40 million. The increase is devoted to the elimination of the backlog and provides a $2 million increase to the small cities set-aside In fiscal 2023.
The bill also provides an ongoing $5 million increase to the program to increase the small city set-aside from $10 million to $15 million. After that, the program will be funded at $30 million going forward, with $15 million for the small city set-aside and $15 million for large cities.
Dawson said other provisions of the governor’s housing proposal will be contained in other legislation being handled through the appropriations process next week.
The bill also proposes to create a New Manufacturing 4.0 Grant Program to be established and administered by the state Economic Development Authority for small businesses with three to 75 employees that have had a manufacturing facility in Iowa for at least three years and gets at least 50 percent of its revenue from manufacturing.
The maximum amount of financial assistance awarded to a manufacturer would be $75,000.
Other provisions redesign the Energy Infrastructure Revolving Loan Program by providing financial assistance for the development and construction of energy infrastructure.
Also, the Brownfields/Greenfield redevelopment tax credit program is extended for 10 years and maintains its allocation at $10 million. The bill also reduces the EDA high-quality jobs funding cap from $105 million to $70 million.
Sen. Bill Dotzler, D-Waterloo, called SSB 1269 a “glass half full and half empty” proposal.
Sen. Todd Taylor, D-Cedar Rapids, said the bill still needs a lot of work and hopefully other components dealing with critical housing needs that were moved to the Senate Appropriations Committee will get addressed yet this session.
During her weekly news conference Wednesday, Reynolds told reporters she would consider whatever tax policy bills the Legislature passes this session — having called for eliminating the income-tax triggers and accelerating the relief to taxpayers during her Jan. 12 Condition of the State address.
“By removing the triggers, it guarantees Iowans that historic tax cut that we passed in 2018 actually will go into effect,” she added. “I think we’re probably going to meet it anyway with the projections that we’re looking at but it ensures that they will see those tax cuts.”