DES MOINES, Iowa — In almost all instances, tax breaks being promoted in the Iowa General Assembly help the wealthiest individuals and corporations, at the same time lawmakers are calling for unnecessary budget cuts as revenues have turned around.
"Iowa needs the balanced approach to budgeting that has long been missing," said Charles Bruner, author of a new report for the nonpartisan Iowa Fiscal Partnership. "Despite assertions to the contrary, Iowa spending and taxes have declined as a share of the economy — and that was before big budget cuts of recent years.
"Nobody is saying we're flush with revenues, but the picture has improved and we can get through without major cuts. But that assumes we don't dig a bigger hole with unnecessary and unwise cuts in revenues."
Bruner, executive director of the Child & Family Policy Center, said new tax breaks proposed in the Iowa General Assembly and by Governor Branstad “could force further cuts in public expenditures in excess of $1.6 billion annually.
“That's about one-quarter of the existing state general fund budget,” Bruner said. “These cuts simply are not sustainable if Iowa is to meet its obligations to education, public safety and economic security of its people," Bruner said.
Among those cuts:
— cutting the corporate income tax rate in half — costing $359 million in the next two fiscal years;
— coupling with federal tax changes — costing $80 million through FY2013, not including a bonus depreciation break for large businesses.
— granting the bonus depreciation break for companies with more than $500,000 in profits — costing between $126 million and $224 million through next year, depending on whether the break is made retroactive for this year;
— cutting personal income tax rates by 20 percent — costing $1 billion over the next two fiscal years;
“Since K-12 education is almost half of the state general fund budget, this would require huge cuts to public schools, where more than 80 percent of the funding is for teachers, counselors, and other school personnel,” Bruner said. “Cutting jobs hurts the economy.”
In addition, Bruner's policy brief noted the proposal to cut commercial and industrial property assessments by 40 percent.
“That will have a substantial impact on cities, counties and school districts, because commercial and industrial property provide about one-third of local property-tax revenue,” Bruner said. "The loss of revenue will have to be paid for with more state funds, or higher local property taxes on residential and farm property.”
The Iowa Fiscal Partnership is a joint public policy analysis initiative of two Iowa-based, nonpartisan, nonprofit organizations: The Iowa Policy Project in Iowa City and the Child & Family Policy Center in Des Moines. IFP reports are at www.iowafiscal.org.