A Republican-sponsored committee at the statehouse Monday got an earful from Iowa businesses and individuals who might be affected if the GOP succeeds in scaling back hundreds of millions of dollars in tax breaks.
Both parties agree tax credits are one of the fasting-growing pieces of the state budget.
The cost of one list of credits approaches half a billion dollars, ranging from incentives for businesses to attract new jobs, to tax breaks for families who adopt kids, to credits for contributions to private school tuition.
The bill would set a new cap on the credits and gradually reduce the cap over time.
Mike Owen with the Iowa Policy Project is worried the earned income tax credit which benefits low-wage working families would be put in competition with all the others.
“We should be raising the percentage to get people more up to a cost of living bare bones budget, a family-sustaining budget,” Owen said. “It’s one of the best policies you have in the state of Iowa to help those families.”
About 220,000 households receive a roughly $400 credit each year.
“Oftentimes they are working at an entry level job at an entry level wage because they don’t have a history of work experience,” said Lana Shope with Iowa Community Action Agencies. “So we see the earned income tax credit as a real incentive.”
Business groups that benefit from several economic development credits say capping the credits now reneges on expectations businesses had when they set up shop in Iowa.
They argue tax credits should stay in place until Iowa’s uncompetitive corporate income tax system is reformed.
“The corporate income tax rate cripples our state in regards to attracting and maintaining industries that create jobs,” said Jennifer Kingland with the Iowa Taxpayers Association.
A panel from the Iowa House Appropriations Committee heard numerous concerns from entities that could be affected by the cap, from alternative energy producers to volunteer firefighters who get a hundred dollar break on their income taxes each year.
“These tax credits allow our volunteer EMT’s to generate more income,” said Mike Triplett with the Iowa Emergency Medical Services Association. “It also encourages people to become volunteer EMT’s.”
Rep. Pat Grassley (R-New Hartford) chairs the House Appropriations Committee.
He said he was not surprised to hear so much opposition to the bill.
“I fully expected this to be the situation, Grassley said. “That's why when you introduce a bill like this you have to include everything to have a comprehensive conversation.”
Grassley says he expects to hold at least one more subcommittee hearing on the bill.