The Iowa Legislature has gone home to get re-elected. As usual, they left the Iowa tax law a little worse than they found it. They did pass a few new special breaks for their friends and for politics, but they did nothing to simplify Iowa’s high-rate, high-complexity system full of hidden treats for the well-lobbied.
The bills passed include:
A refundable $2,500 adoption credit (HF 2468). Refundable credits are always a bad idea. There was apparently no discussion over whether the credit is really needed, or a better use of money than alternate programs, but because a legislator had an expensive adoption, it became a priority.
Sales tax rebates for the Newton racetrack (SF 2341) and the Knoxville Raceway (HF 2464). The bills let each track keep sales taxes they collect — a sweet deal, and an advantage for two taxpayers over every other taxpayer.
Biodiesel tax credits. SF 2344 gives biodiesel producers two cents per gallon of taxpayer money, in the form of refundable credits, through 2017. The credit was to expire at the end of 2014. This is necessary to keep taxpayer dollars flowing to producers until the next time the credit is set to expire, when they will extend it again, just one more time, I promise.
HF 2448 passed, providing for easier qualification for the “High Quality Jobs Program” tax credit and a new “Workforce Housing Tax Incentives Program,” which will provide tax credits to housing developers meeting certain conditions designed, no doubt, by one of their lobbyists. This will do away with the hobo camps that have not sprung up around job sites around the state.
The only really useful thing they passed was the “code conformity bill (HF 2435) to conform Iowa income tax law to include federal tax law changes made in 2014. In some years they have failed to do so until the end of the session, leaving taxpayers and preparers guessing at the tax law for most of the filing season.
Of course, it could have been worse. Not every special interest bill passed.
The most prominent failure was that of HF 2472, a bill to provide tax credits for expanding broadband service. This was a priority of Governor Branstad, killed by a coalition of Democrats who say they wanted bigger credits — but who may have just wanted to hand the Governor a defeat — and Republicans who thought the bill was badly designed. S.F. 2043, which would have provided a special tax exemption to employee-held stock gains, failed to move. A proposal to provide a tax credit for student loan payments went nowhere. A crazy proposal (H.F. 2270) to pay doctors with tax credits for “volunteering” — at their average hourly rate! — died.
Not everything that died was awful. HF 2129, which would have expanded the Iowa “Ten and Ten” capital gains break to sales of business interests, never made it out of committee. Nor did SF 2222, which would have repealed the Iowa inheritance tax.
They also failed to pass SSB 3216, the bill to update the Iowa tax appeals system and to remove the Director of the Department of Revenue from the process. Maybe they can do better next time by also enacting an Iowa tax court. It seems reasonable to have, say, three district judges from around the state convene as a tax court. They could give taxpayers a shot at a judicial forum where the judges will have actually heard an income tax case before.
Most importantly, they didn’t even try to address Iowa’s highest-in-the-nation corporate tax rate, its high individual tax rate, or the baroque complexity of Iowa’s income tax for everyone -- other than by making it a little worse with a few new special breaks for special friends. That means the legislature gets another D-, in my report card, with only the timely passage of the code conformity bill saving them from an F.
But who knows? Elections coming this fall could bring in a few more legislators less intent on taking your money and giving it to friends with lobbyists, to build on the tiny signs of progress seen this session. Who knows, maybe someday a real tax reform, like the Tax Update’s Quick and Dirty Iowa Tax Reform Plan, will actually get a hearing.
TaxProf, The IRS Scandal, Day 361
Russ Fox, Yes, Mom, I Need to See Your ID. This one I will spend more time on — the IRS, without consultation, plans to make e-filing much more difficult and expensive for everyone, to punish us for their failure to stop ID-theft fraud.
Philip Panitz, Welcome to America, Now Give Us Your Money! (A guest post on Janet Novack’s Forbes blog). An excellent summary of how the tax law clobbers immigrants, and one I should spend more time on.
Kay Bell, Representatives want to prevent Los Angeles Clippers’ owner Donald Sterling from deducting his $2.5 million NBA fine. Not every problem is a tax problem, guys.