Tax Cuts vs Schools: Something Has to Give, But Branstad Won’t Say Why

SOMETHING HAS TO GIVE:  State Cannot Afford Branstad’s Corporate Property Tax Cuts And Invest In Vital Public Services At the Same Time


Iowa CCI Action Fund members say corporate property tax cut law must be repealed and new revenue raised by closing corporate tax loopholes and ending federal deductibility for Iowa’s wealthiest citizens


On January 27, Governor Branstad told the Iowa press corps that there is no room in his five-year budget for setting allowable school growth at six percent, as Senate Democrats propose, but the governor failed to give the reason why:  because his “signature bipartisan achievement”, corporate property tax cuts, is so expensive that the cost will burn through Iowa’s budget surplus in just a few years without leaving any money left over for investing in the vital public services that everyday people and hardworking families depend on like education, environmental protections, infrastructure, and workforce development.

This looming budget reality is now one of the biggest political issue in the state, and the public debate surrounding it will continue through the remainder of the 2014 legislative session as well as through the November elections.  But the issue also poses problems for Democrats, who are now in the position of advocating for policies like allowable school growth that their own votes on the corporate property tax cut bill have made it more difficult to afford.

Branstad’s corporate property tax cuts passed last year will cost the state $277 million next year and ultimately peak out at $380 million per year.  Even with the backfill, county governments will face a $740 million shortfall over ten years, and the stories of how local government responds in the coming weeks of months will continue to fuel statewide discussions.

In the short-term, Iowa’s surplus will be able to absorb the cost of the corporate property tax replacements, but the state is now on a collision course with a budget reality few from either party want to admit:  the corporate property tax cuts are simply unaffordable without sacrificing investments in bread and butter programs like preschool, K-12 education, community colleges, factory farm enforcement, water quality monitoring and cleanup, and job training.

Unless, Iowa Citizens for Community Improvement Action Fund (Iowa CCI Action Fund) members say, the state repeals the corporate property tax cut law and raises new revenue by closing corporate tax loopholes and ending federal deductibility for Iowa’s wealthiest citizens.

“Governor Branstad says we can’t afford to invest in our schools anymore, but he won’t say why:  because the corporate property tax cuts he championed are stealing the wealth of the state and robbing our children and our teachers,” said Ross Grooters, a train engineer and CCI Action Fund member from Pleasant Hill with a second-grader at Delaware Elementary School.

“But the truth is, there is still time to save our schools, if we raise new revenue by repealing the corporate property tax cut law, end federal deductibility for Iowa’s wealthiest citizens, and close corporate tax loopholes so out-of-state CEOs start paying their companies’ fair share of taxes.”

In December, CCI Action Fund members released a “People First Iowa” blueprint for the state that includes tax policies to force factory farms and other out-of-state corporations to pay their fair share.  The “People First Iowa” initiative includes:

  • Raising the minimum wage – more personal income means a larger tax base, and more money in workers’ back pockets means more demand, which creates more spending;
  • Combined corporate reporting – to close a loophole in Iowa tax code that allows out-of-state corporations like WalMart and McDonalds to avoid paying income taxes on sales generated in Iowa;
  • Ending the Research and Development Tax Credit, which gives out-of-state corporations like John Deere and Rockwell Collins a tax credit so large that they end up receiving a rebate check from state government rather than actually paying any taxes themselves;
  • Closing three tax loopholes that factory farm polluters get on their manure pits, animal feed, and electricity.  The pollution control tax exemption is a revenue drain on county government that, if ended, could produce new revenue to fix county roads damaged by factory farm trucks, while the state tax credits for animal feed and confinement electricity could be better spent on finding new initiatives to help young farmers, women farmers, and immigrant farmers get affordable access to land and diversified markets, while helping existing farmers transition to more sustainable methods.
  • Passing a Corporate Tax Transparency Act that would require publicly traded companies doing business in Iowa to publicly post the state taxes they pay, or don’t pay, so that everyone knows.

Iowa CCI Action Fund, the Iowa Policy Project, and the Iowa Association of Counties were some of the only stakeholders who stood up and spoke out against the proposed tax cuts last session.

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