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Report says Iowa tops in cutting taxes
DES MOINES (AP) --- A new report says Iowa cut taxes by more than 1 percent of its expected revenue in the current budget year, the only state in the nation to do so.
"There were close to a dozen that did have net tax cuts, but to a far less degree than Iowa," said Bert Waisanen, a fiscal affairs specialist for the National Conference of State Legislatures who compiled the report.
Iowa's tax cuts for the budget year that began July 1 include $41 million for reducing the tax on insurance premiums and $18 million for the phaseout of the state sales tax on residential utility bills, said Jeff Robinson, an analyst with the Legislative Services Agency.
The projected $59 million impact in the current fiscal year is about 1.2 percent of the state's estimated gross tax receipts of $5 billion, Robinson said. That's a greater percentage than any of the 40 states that responded to the National Conference of State Legislatures' survey.
In contrast, seven states raised taxes by more than 1 percent. Meanwhile, most of Iowa's neighboring states had no significant tax changes, according to the report.
Soaring heating bills led Gov. Tom Vilsack and lawmakers to approve a law in February 2001 that is gradually eliminating the state sales tax on natural gas, propane, heating oil and electricity over a period of five years. The tax, 2 percent this year, will drop to 1 percent next year and be eliminated by Jan. 1, 2006.
"I think we're going down the right path," said Senate Majority Leader Stewart Iverson, a Dows Republican. "We have to be different than other states. We have to let people know that we're serious about improving the business climate."
But Rep. Ed Fallon, a Des Moines Democrat, said Iowa cannot afford to continue cutting taxes and slashing the state's ability to provide basic services.
"We're, in fact, out of step with what legislatures across the country are doing," said Fallon, who earlier this year proposed repealing tax cuts to help pay for education. "The tax cuts are a big reason why our budget is having trouble."
"This report confirms what we've been saying all along, and that is Iowa doesn't need any more tax cuts," said Lana Oppenheim Schlapkohl, a spokeswoman for the Iowa State Education Association, which represents about 32,000 teachers.
Critics of the tax cuts point out that Iowa has undergone several years of budget cuts. Schlapkohl said that over the past few years, schools have lost more than $200 million in promised money.
"What we think is what we need to do now is increase revenue," she said, adding that without enough money, schools risk losing teachers and increasing class sizes.
Vilsack has argued repeatedly that tax cuts have taken a total of $974 million a year away from the state budget.
In January, he proposed a $283 million tax increase that included raising the tax on cigarettes by 60 cents a pack and expanding the 5 percent state sales tax to services such as engineering, accounting, public relations and computer programming. His proposal was rejected by the Legislature.
Senate President Jeff Lamberti, an Ankeny Republican, said Iowa must continue to take steps if it wants to grow. "In order to get more competitive and improve our economy, we need to continue to lower our taxes," he said.
A 2002 law is reducing the tax that insurance companies pay on the premiums they collect from 2 percent to 1 percent over four years. Insurers warned that if the tax was not lowered, companies would move to other states.
"There were a couple of significant companies that were seriously thinking of moving their domicile before this happened," said John Schachterle, executive director of the Federation of Iowa Insurers. "It's been good for job preservation."
Iowa is one of the top insurance states in the nation. More than 250 insurance companies have their headquarters in Iowa. They employ about 70,000 people and have a payroll of $1.5 billion, said Bob Skow, chief executive officer of the Independent Insurance Agents of Iowa.
"There were close to a dozen that did have net tax cuts, but to a far less degree than Iowa," said Bert Waisanen, a fiscal affairs specialist for the National Conference of State Legislatures who compiled the report.
Iowa's tax cuts for the budget year that began July 1 include $41 million for reducing the tax on insurance premiums and $18 million for the phaseout of the state sales tax on residential utility bills, said Jeff Robinson, an analyst with the Legislative Services Agency.
The projected $59 million impact in the current fiscal year is about 1.2 percent of the state's estimated gross tax receipts of $5 billion, Robinson said. That's a greater percentage than any of the 40 states that responded to the National Conference of State Legislatures' survey.
In contrast, seven states raised taxes by more than 1 percent. Meanwhile, most of Iowa's neighboring states had no significant tax changes, according to the report.
Soaring heating bills led Gov. Tom Vilsack and lawmakers to approve a law in February 2001 that is gradually eliminating the state sales tax on natural gas, propane, heating oil and electricity over a period of five years. The tax, 2 percent this year, will drop to 1 percent next year and be eliminated by Jan. 1, 2006.
"I think we're going down the right path," said Senate Majority Leader Stewart Iverson, a Dows Republican. "We have to be different than other states. We have to let people know that we're serious about improving the business climate."
But Rep. Ed Fallon, a Des Moines Democrat, said Iowa cannot afford to continue cutting taxes and slashing the state's ability to provide basic services.
"We're, in fact, out of step with what legislatures across the country are doing," said Fallon, who earlier this year proposed repealing tax cuts to help pay for education. "The tax cuts are a big reason why our budget is having trouble."
"This report confirms what we've been saying all along, and that is Iowa doesn't need any more tax cuts," said Lana Oppenheim Schlapkohl, a spokeswoman for the Iowa State Education Association, which represents about 32,000 teachers.
Critics of the tax cuts point out that Iowa has undergone several years of budget cuts. Schlapkohl said that over the past few years, schools have lost more than $200 million in promised money.
"What we think is what we need to do now is increase revenue," she said, adding that without enough money, schools risk losing teachers and increasing class sizes.
Vilsack has argued repeatedly that tax cuts have taken a total of $974 million a year away from the state budget.
In January, he proposed a $283 million tax increase that included raising the tax on cigarettes by 60 cents a pack and expanding the 5 percent state sales tax to services such as engineering, accounting, public relations and computer programming. His proposal was rejected by the Legislature.
Senate President Jeff Lamberti, an Ankeny Republican, said Iowa must continue to take steps if it wants to grow. "In order to get more competitive and improve our economy, we need to continue to lower our taxes," he said.
A 2002 law is reducing the tax that insurance companies pay on the premiums they collect from 2 percent to 1 percent over four years. Insurers warned that if the tax was not lowered, companies would move to other states.
"There were a couple of significant companies that were seriously thinking of moving their domicile before this happened," said John Schachterle, executive director of the Federation of Iowa Insurers. "It's been good for job preservation."
Iowa is one of the top insurance states in the nation. More than 250 insurance companies have their headquarters in Iowa. They employ about 70,000 people and have a payroll of $1.5 billion, said Bob Skow, chief executive officer of the Independent Insurance Agents of Iowa.
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