Tax cuts and education funding can be on the table, say Senate Democrats

Iowa Senate Democrats say their proposed commercial property tax relief fund program will not affect municipal governments or school districts by making up revenue, as opposed to a plan proposed by Gov. Terry Branstad.

“This bill proves the larger point (Democrats) have tried to make this session,” House Minority Leader Kevin McCarthy (D-Des Moines) said Thursday. “The point being there can be a tax cut while keeping (universal) preschool and permitting allowable growth (to school district budgets).”

The permanent Business Property Tax Relief Fund, targeted at “Main Street”-type businesses, will reduce taxes by $50 million annually starting in July 2012, and the appropriation to that fund would grow by the same amount each year that state revenues see a four percent increase, until $200 million is reached, Sen. Joseph Bolkcom (D-Iowa City) explained in a press release.

“The genius of this plan, if I may call it that, is that the fund will increase when state revenue is healthy enough to support it,” Bolkcom said Thursday while meeting with reporters.

The plan is outlined to give a $600 tax reduction on the first $30,000 of a property’s assessed value in the first year. Subsequent tax credits can range from $600 to $5,300, depending on the structural assessed value.

“(Local business leaders) told us that reducing Iowa’s high commercial property tax rates is essential,” Bolkcom said. “We’ve responded with a proposal to provide $200 million in desperately needed business and commercial property tax relief, and we do it without hurting local government of local schools.”

The Senate Democrats’ Business Property Tax Relief Fund pits itself against Branstad’s proposal, which cuts commercial property taxes by 40 percent, with municipal governments standing to lose $500 million in revenue. Branstad has said half of the revenue would be made up by the state, which has been met with criticism from Democrats and some municipal governments.

However, Branstad did not criticize the Senate Democrats’ proposed tax relief fund. In a statement released by the Governor’s office, Branstad said he was “encouraged that legislative Democrats recognize the critical need for reforming and reducing commercial property taxes.”

Branstad said he intends to continue working with lawmakers to “produce a commercial property tax plan that dramatically increases our economic competitiveness.”

But the Business Property Tax Relief Fund may not be the way to do it, some Republican leaders believe.

“When businesses are looking for a place to either relocate or locate, a $600 property tax reduction isn’t going to matter,” Senate Minority Leader Paul McKinley (R-Chariton) said.

Speaker of the Iowa House Kraig Paulsen (R-Hiawatha) said Thursday morning he had not looked at the Democrats’ proposal in detail, but was “excited that we’re starting to talk about things. We all want to handle property tax relief and talk about it.”

He said House Republicans remain in support of Branstad’s proposed plan.

In response to McCarthy’s comment about the Business Property Tax Relief Fund being a measure to keep preschool, funding Paulsen would only say it is “a conversation that I assume is between the Senate and the Governor.”