Sunday, April 13, 2008

News From RPI Chairman Stewart Iverson

$32 million tax increase

Newspapers across the state blared the above headline Thursday morning, as taxes will again be raised in Iowa. That’s right – over $400 million in total tax increases, and counting, so far.

The latest measure would eliminate the local option sales tax for schools, and replace it with a statewide penny sales tax that, for now, is devoted to schools.

Two aspects of this bill are troubling. As we have seen time and time and time again, all too often when the governor and Legislature get their hands on funding, it gets “scooped” for other pet projects, especially in times of economic slowdown.

Second, this tax increase now raises the state’s use tax as well. The use tax is applied when businesses purchase goods from out of the state to use here in Iowa. Businesses often do not pay the sales tax in that state, and instead pay the Iowa use tax, which was exempt from local option sales taxes.

That is, until this bill went on its way.

Republicans offered two amendments that would have protected your tax dollars.

The first amendment would have provided constitutional protection to prevent the sales tax revenue from being scooped, or shifted, for other uses. It also provided that this bill would only take effect upon the ratification of an amendment to the Iowa Constitution to protect all revenues received from the state sales and use tax.

The second amendment would have helped to offset any future property tax increases by stating that if the state’s estimate of general fund revenues exceeds original estimates, the excess revenue would go to the Property Tax Equity and Relief Fund.

Remember – the sole intent of the original local option sales tax was for local residents to approve it themselves, and to only last 10 years.

Now, however, this is a permanent tax on the people of Iowa and a $32 million tax increase on Iowa businesses.