State Rep. Paul Shomshor, D-Council Bluffs, argues for tax credit reform at a Thursday news conference at the Iowa Statehouse. From left to right: State Sen. Joe Bolkcom, D-Iowa City, Shomshor, and state Sen. Matt McCoy, D-Des Moines.

The bill, House Study Bill 738, would suspend the film tax credit program for two years; lower the cap from $185 million to $120 million on business tax credits; cut the Iowa Fund of Funds contingent tax credits from $100 million to $60 million; cut the Supplemental Research Activities Tax Credit in half for large corporations; and overall cut 10 percent for many other tax credit programs.

The bill also calls for regular evaluation of credits, and those which do not produce results will be fixed or eliminated.

Business assistance tax credits increased from $144.3 million in FY2006 to $242.7 million in FY2008.

“Every part of the budget is being cut and that will now include tax credits,” said state Rep. Paul Shomshor, D-Council Bluffs, who chairs the House Ways & Means Committee. “The public will know who receives each tax credit, the purpose of that credit, and the dollar amount spent on it. As we give tax credit spending the same careful, regular, open examination as the rest of the budget, we will both save money and make sure the dollars we do spend benefit Iowa middle class families.”

Numerous groups have been pressing lawmakers to look at the state tax credit program for years. In an interview with The Iowa Independent, Victor Elias, senior policy analyst with the Iowa Child & Family Policy Center, said the legislature appeared to be focused solely on cuts and uninterested in reforms to the tax code to enhance revenue. That strategy might balance the budget but would cause long-term harm to the state’s economy and the state’s residents, he said.

“Tax subsidies can no longer trump educating our kids when it comes to our public spending priorities,” said Sen. Joe Bolkcom, D-Iowa City, who chairs the Senate Ways & Means Committee. “We all support effective economic development programs, but they must be far more transparent and accountable for creating good paying jobs.”

House Republican Leader Kraig Paulsen of Hiawatha was quick to attack the bill, telling The Des Moines Register that it amounts to a tax increase.

Creative Commons photo by jimmywayne via Flick

House Republicans attempted to invoke House Rule 60, a procedural move that allows a majority vote on the floor of the House to pull a bill out of a committee even if the committee has not approved it. The hope was that seven Democrats would join the 44 Republicans in the House and force a vote on House Joint Resolution 6, sponsored by state Reps. Dwayne Alons, R-Hull, and Delores Mertz, D-Ottosen. The bill would begin the process of amending the state’s constitution to declare marriage as only between one man and one woman.

Only Mertz joined with the GOP, causing the effort to fail. House Minority Leader Kraig Paulsen, R-Hiawatha, told reporters that the issue is likely dead this session.

“This is it,” he said. “Either there’s 51 people who want to do it or there’s not.”

Paulsen said afterward that the outcome did not come as a shock.

“I’m not surprised by the result of today’s vote,” he said. “Gov. Culver and the Democrat leaders have made it clear they do not want Iowans to have an opportunity to vote on defending traditional marriage. The likelihood of the vote count changing this session is highly unlikely,”

In the Iowa Senate, Minority Leader Paul McKinley, R-Chariton, attempted to bring a similar bill, Senate Joint Resolution 2001, to the floor by getting a majority of lawmakers to sign a petition pulling it out of committee. All 18 Republicans signed on but only one of the chamber’s 32 Democrats — Tom Hancock of Epworth — joined them, causing their effort to fail as well.

McKinley said the fate of marriage will now be left to voters in the fall legislative elections.

“Iowans are tired of senators saying back home that they support allowing Iowans a vote and then not keep their word when they get to Des Moines,” McKinley said. “While our bi-partisan effort fell short of gaining the 26 votes needed to proceed, the voters this November will have an opportunity to decide if they are content with the continued Democrat obstruction and inaction”

Hancock told The Des Moines Register that he voted with Republicans because he lives “in a highly Catholic area” and his constituents want to vote on the marriage issue.

Gay-rights advocates applauded the defeat of the procedural moves, saying Republicans are out of touch with mainstream Iowans. A recent Des Moines Register Iowa Poll found that 62 percent of Iowans believe lawmakers should focus on other things besides gay marriage.

“Republicans once again pursued an agenda that is out of touch and irresponsible,” said Brad Clark, campaign director for One Iowa, the state’s largest gay-rights organization. “We applaud House Democrats who demonstrated their commitment to a responsible agenda to balance the budget and their commitment to freedom for all Iowans.”

Before the 2010 legislative session was underway, Senate Majority Leader Mike Gronstal, D-Council Bluffs, made his opinion clear on the issue.

“I will not write discrimination into the constitution of the State of Iowa,” Gronstal told The Iowa Independent. “I’m going to block that at every opportunity. There will be no vote on the constitutional amendment.”

With Gronstal’s adamant support of same-sex marriage, along with House Speaker Pat Murphy, D-Dubuque, social conservative leaders conceded that the likelihood that a ban could ever be passed in 2010 was very remote. The best they could hope for was to attempt to get Democrats on the record in support of same-sex marriage and use the issue during the 2010 legislative elections.

Supporters of marriage equity are taking nothing for granted, though. During the 2009 session House Republicans also failed to force a vote on marriage using House Rule 60. But a constitutional amendment was tacked on to several other bills. State Rep. Chris Rants, R-Sioux City, first attempted to attach a constitutional ban on same-sex marriage to the state’s Health and Human Services budget, but the move was ruled out of order.

He then attempted to insert language in a Democratic tax proposal that would have defined a married couple as “a man and a woman” for the purposes of the state’s tax code. That effort also failed.

In the Senate, less effort was put into getting a ban passed, causing Christian radio host Steve Deace to criticize McKinley during his drive-time program on Iowa’s largest radio station for “feeding constituents a line of bull” about doing everything possible to stop same-sex marriage.

Anti-McKinley fliers were reportedly being distributed in Pella, paid for by a Virginia-based conservative group called Public Advocate of the United States, that called McKinley a “chicken” for not pushing harder to force a vote.

McKinley made one attempt at forcing a vote on a constitutional amendment in 2009, requesting that Gronstal join him in crafting legislation to begin the process. Gronstal refused and the matter was dead.

The year began with another in a string of disappointing legislative sessions. None of labor’s four priorities — choice of doctor, prevailing wage, open-scope bargaining and fair share — garnered the 51 votes needed in the Iowa House to pass, despite a 56-44 Democratic majority that organized labor helped build.

Then the economy crashed, creating a gaping hole in the state’s budget that was filled with across-the-board cuts. The group most affected by these cuts was public sector employees, who agreed to re-open their contracts in order to avoid nearly 500 layoffs.

Now, with the 2010 General Assembly set to gavel into session next week, more budget cuts are on the horizon. So while their four principal legislative goals remain unchanged, the focus has shifted to ensuring legislators make sound budget decisions and avoid massive layoffs.

“Because of what we went through the last couple months with having to sit down with the governor to come up with an understanding and then having a statewide vote by our members to take five unpaid days to save 479 jobs, our priorities have shifted somewhat,” said Danny Homan, president of the American Federation of State, County and Municipal Employees Iowa Council 61.

AFSCME’s members are understandably concerned, Homan said, and “some are probably very pissed off.” The bulk of what has been done to this point to balance the state budget “has been done on the back of the state’s employees,” and now they are worried about what will happen to them in the next fiscal year.

“At some point, doing more with less just breaks down, and I think we’re at that point,” he said. “I think we have to figure out how to keep what we have, because we just can’t keep doing more with less. The less is running out.”

Homan said one of the first goals would be to work out an early retirement package so that some state workers can leave their jobs voluntarily instead of being forced out. The union is also going to push for a comprehensive overhaul of the state’s workforce.

“The system right now is heavy on management,” he said. “We want to go in and take a look at the level of management we have in state government and make sure that’s at an appropriate level and come up with ways to, instead of always laying off the folks who do the front-line work, maybe eliminating some middle management positions that have grown during good times.”

The hardest work, though, will be reworking Iowa’s tax system to make it fairer, said Ken Sagar, president of the Iowa Federation of Labor AFL-CIO.

“We are at one of those critical points where we as a state are going to have to decide how we’re going to do things in the future,” Sagar said. “Are we going to continue to give tax breaks to people so they can buy airplanes, or, are we going to take those tax breaks back and fund education?”

Legislators, especially in the wake of the film tax credit scandal, have already vowed to look at all tax credits offered by the state to evaluate their worth. Homan said that while no one wants to pay more taxes, there are obvious examples of tax breaks that benefit the few that could be eliminated.

“You don’t pay any sales tax on ostriches,” he said. “Somebody that goes out and buys an airplane, they don’t pay a sales tax on an airplane, nor do they pay sales tax on the parts to repair that airplane. Clearly, legislators don’t want to raise taxes, but there are things they can do that won’t raise a single tax on a large majority of Iowans.”

Another example of smart budgeting would be combined corporate reporting, which would close a tax loophole allowing multi-billion dollar corporations that do tens of millions of dollars of business in Iowa to avoid paying Iowa income taxes, said Marcia Nichols, political and legislative director for American Federation of State, County and Municipal Employees Iowa Council 61.

“For a corporation to come in here and make money off of Iowa citizens and pay no taxes, we’ve been harping on that for eight years now,” she said. “That’s not going to affect the average citizen, but it will put more money in the state government to allow us to continue to provide services to the most vulnerable citizens and education of our children.”

Four principles

Despite an historic budget crisis, Nichols said labor will still be working to pass the four principles it has been advocating for many years. While the votes are there in the state Senate, in the House a handful of Democrats have blocked the passage of labor’s priorities. And when a bill expanding collective bargaining rights of public employee unions cleared the legislature in 2008 it was vetoed by Gov. Chet Culver.

Republicans and business groups like the Association of Business and Industry have been adamantly opposed to labor’s agenda. House Minority Leader Kraig Paulsen, R-Hiawatha, told the Mason City Globe-Gazette that as long as the labor bills remain on the table, some employers would not invest in Iowa or its work force.

Sagar points to one of the four bills — changing Iowa workers’ compensation law to allow employees the right to designate a doctor to treat them for workplace injuries — as an example of the hypocrisy of the opposition.

“When people were opposing health care reform, one of the principal things they talked about is that ‘By God, we have to make sure you don’t lose the ability to choose your own health care provider,’” he said. “And yet, here in Iowa it seems to be almost sacrilegious for people to choose their health care provider if they happen to be injured on the job. This doesn’t make any sense to me.”

One unlikely ally labor has garnered is Steve Deace, the host of a Christian program on Iowa’s largest radio station and an influential voice in the social conservative community. While he doesn’t necessarily support labor’s agenda, he called Republicans “hypocrites” for opposing things like “choice of doctor.”

“They don’t want to let the little guy go to the doctor of his choosing, yet they’re also concerned the Mitt Romney-[Barack Obama] health care omnibus bill is going to allow the government to dictate what health care you can get and from whom,” he said. “Huh?”

Deace also pointed to prevailing wage, which would require contractors to pay the same hourly wages and benefits on public projects as they would pay on private sector projects, as an example of Republican hypocrisy.

“A lot of the same Republicans railing against things like prevailing wage also have no problem with raiding taxpayer money for their corporate buddies,” he said. “For example, how many of the top Republican donors in Iowa are getting rich off of taxpayer-subsidized industries like ethanol or state-sanctioned gambling?”

If corporations and millionaires are going to be allowed to “raid the treasury, then it’s only fair to let the little guy who does most of the living and dying in this state get his cut as well,” Deace said.

Election year power

In recent years, national and international unions have played a significant role in Iowa elections. In 2008, AFSCME International donated $346,000 to the political action committee of its Iowa local, AFSCME Iowa Council 61. Among other big unions donors were the Service Employees International Union, which donated $125,000 to its local, and the Laborers’ International Union of Illinois, which contributed $200,000 to the Great Plains Laborers’ Council Iowa PAC.

That money helped Democratic candidates and county parties around the state, and Democrats expanded their majorities in both the House and Senate.

But after Democratic majorities failed to move key components of organized labor’s agenda from 2007 to 2009, some Democrats are quietly concerned that national labor groups won’t direct resources to Iowa, instead moving on to other states where large investments seem more likely to pay dividends.

Homan said who the union ultimately supports will be up to the members, just like it has always been.

“Who our members want to go out and work for are the candidates we will work for,” he said. “Frankly, it’s never been about how much money this union gives. It’s about people we can put in the streets working for candidates. We will work for candidates who will work for working people issues.”

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said during a time of economic trouble, labor bills would help bolster the state’s middle class.

“We’d like to grow the middle class in Iowa and we think those issues will help strengthen the voice of ordinary people in the work place, and that’s important,” he said. “It’s hard to tell whether the votes are there to pass them. I can’t say I know at this point what the best opportunities are, but if we find the votes we will certainly go forward with them.”

As the news site Politico points out, the details of how, exactly, a state can opt out are still not known. It could be a vote in the legislature, or, it could be put to the public in the form of a referendum. But with at least one prominent Iowa Republicans already calling any public health care option reason to invoke the 10^th Amendment, if U.S. Senate Majority Leader Harry Reid, D-Nevada, gets his way health care could join the myriad issues facing Iowa legislators in the coming years.

When contacted by the Iowa Independent, a spokesperson for House Minority Leader Kraig Paulsen, R-Hiawatha, declined to comment. Senate Minority Leader Paul McKinley, R-Chariton, did not respond to several attempts to get his views on the issue.

But Republican gubernatorial hopeful Bob Vander Plaats has already made an issue out of the push for health care reform, saying Iowa should not only opt out of federal health care reform but possibly opt out of Medicaid and Medicare as well.

In Kansas, conservative lawmakers are already suggesting changing the state Constitution to exempt the state from federal health insurance mandates.

It is important to remember, though, that in Iowa Democrats still control majorities in both legislative chambers, meaning any debate surrounding opting out of health-care legislation will likely be saved for the campaign trail.

Tom Wheeler, who was put on paid administrative leave on Friday after problems were discovered in the Film, Television and Video Promotion Program, has been dismissed effective Monday afternoon, the governor said in a statement. Wheeler was in charge of negotiating tax-credit deals with filmmakers and was running the tax credit program single-handedly.

In addition, the governor has accepted the resignation of Vince Lintz, deputy director of the Iowa Department of Economic Development. That department oversaw the Iowa Film Office. The director of IDED, Mike Tramontina, resigned on Friday.

IDED is currently reporting to Richard Oshlo, director of the Department of Management, while new leadership for the department is being considered.

The controversy surrounding the tax credits emerged last week after an internal audit discovered problems in the program such as filmmakers claiming payments for themselves for multiple production jobs and for the purchase of luxury vehicles that were not associated with film production.

The governor’s political rivals are already pouncing on the controversy. In a joint statement to the media, House Minority Leader Kraig Paulsen, R-Hiawatha, and Senate Minority Leader Paul McKinley, R-Chariton, said Culver’s lack of oversight and failure to properly manage the film tax credit has not only put the program in jeopardy “but already wasted millions in taxpayer money.”

The two GOP lawmakers also sent a letter to Senate President Jack Kibbie, D-Emmetsburg, and House Speaker Pat Murphy, D-Dubuque, asking that the Legislative Oversight Committee investigate the tax credit scandal.

Culver asked Attorney General Tom Miller and Auditor David Vaudt to assist in investigating the program Monday morning. No time frame has been set for that probe.

“My father’s home in Palo was one that was flooded last summer,” said Cedar Rapids resident Heather Akers, who volunteered along with her husband and two young children to deliver the pots of flowers to residents. “We are interested in opportunities to help people out, and this seemed like a really nice gesture. We helped right after the flood, mucking out the damage, but it is really nice to return and do something else now that it has been a year.”

Cedar Rapids resident Heather Akers said it was good for her children -- Harrison, 7, and Zoey, 4 -- to see that people have returned to Palo and are rebuilding the community. The children's grandfather, a resident of Palo, lost nearly everything during the 2008 flood.

“Yes,” Harrison responded when asked if he thought the deliveries were a good thing. He added “great,” when asked how he thought people would feel about the gifts.

“It’s good for the kids to see that people are coming back and that things are being rebuilt,” Heather added. “It was kind of tough for them to see grandpa lose so much stuff last summer.”

A total of 350 pots of red, white and blue petunias were loaded into trailers and the backs of pick-up trucks Saturday morning. The gifts were made possible by the Rebuild Palo Fund with support and contributions from Anderson-Bogert Engineering and the Cedar River Garden Center, and will be bright additions to a landscape that still bears the scars from last summer.

“It’s a good way for us to acknowledge this first anniversary of the flood,” said Jeff Beauregard, mayor of Palo. “It’s good to welcome everyone back, and its good for everyone to know that we are still working together to rebuild.”

A label placed on each pot featured a quote from Lady Bird Johnson: “Where flowers bloom, so does hope.” In the coming days, many Iowa communities impacted by the 2008 floods will commemorate the one-year anniversary with parades, community gatherings and video footage.

Iowa Sen. Swati Dandekar (above) and Iowa Rep. Kraig Paulsen (below), both of whom represent Palo in the state legislature, were on hand to help load and deliver the petunias to each doorstep in the community.

House Minority Leader Kraig Paulsen, R-Hiawatha, issued a statement saying Democrats may “make one last go” at passing labor-backed proposals, pointing specifically at a measure that would expand collective bargaining rights for public sector employees.

Iowans for Tax Relief, a Muscatine-based taxpayer watchdog group, issued an e-mail alert to members that “secret meetings with arm-twisting and horse-trading, are being led by House Democrat leaders” with the goal of passing a tax reform proposal that would end federal deductibility and use the money raised to lower tax rates overall. The organization is asking supporters to call lawmakers and urge them to oppose the measure.

Democratic legislative leaders have insisted that labor-backed legislation and the tax reform bill could still pass this session. It is understood that each of the bills would easily pass the Senate, where Democrats hold a 32-18 advantage. However, House Speaker Pat Murphy has said they won’t be brought to a vote until a 51st vote can be found in the House, something that has proven difficult so far.

A coalition of same-sex marriage opponents, including the Iowa Family Policy Center, the Iowa Christian Alliance and Everyday America, will rally at the capitol today with the hope of convincing lawmakers to take up the controversial marriage amendment. The gathering is expected to go from 11 a.m. to 1 p.m. A similar rally was held Thursday, after which Republican Rep. Christopher Rants of Sioux City tried and failed to attach the amendment, which would ban same-sex marriage, to the Health and Human Services budget.

Most expect another Republican attempt this week to force a vote on the amendment, although House Minority Leader Kraig Paulsen, R-Hiawatha, told the Cedar Rapids Gazette’s James Lynch that the marriage issue wouldn’t prolong the session.

One Iowa, the state’s largest LGBT advocacy organization, is planning to counter the conservative gathering with a “virtual rally” by asking supporters of same-sex marriage to call legislators.

Iowans for Tax Relief will rally Tuesday at 10 a.m. to oppose proposed legislation that would end federal deductibility, which allows state residents to write off their federal tax burden on their state returns. The change is part of a Democratic tax reform plan that could be debated Tuesday or Wednesday. During a public hearing on the bill last month, a group organized by Iowans for Tax Relief had to be removed from the House gallery after repeatedly ignoring requests to stop booing speakers they disagreed with.

Then, on Wednesday, the second Des Moines Tea Party will be held at the capitol from 11 a.m. to 2 p.m. A similar event was held Saturday as part of conservative radio host and Fox News contributor Glenn Beck’s “9-12 Project.” Wednesday’s event is completely separate and designed as an antitaxation demonstration to evoke the memory of the Boston Tea Party. The gathering’s press release says several speakers are scheduled, but their names, as well as the organization behind the gathering, are not listed.

While advertised around the country as spontaneous grassroots gatherings of concerned taxpayers, some observers have pointed out that in many cases the tea parties are organized by corporate lobbyists and conservative groups like FreedomWorks, run by former Republican U.S. House Majority Leader Dick Army.

The group’s Web site does, however, have a list of appropriate signs for the event.

Once the activists, organized by the Iowa Family Policy Center, had moved into the gallery, Republican House Minority Leader Kraig Paulsen made two motions.  First, he attempted to invoke Rule 77, which requires House members to remain in the chambers, preventing them from “taking a walk” if a tough vote comes up.

Confusion ensued.  Paulsen then attempted to invoke Rule 60, which allows a majority vote on the floor of the House to pull a bill out of a committee even if the committee has not approved it.

Currently, the House’s resolution to amend the state constitution to ban same-sex marriage, House Joint Resolution 6, is stalled in the State Government Committee.  Paulsen had hoped to bring it up for a vote anyway.

After a tense half hour in the well on the House floor, Democratic House Speaker Pat Murphy ruled both of Paulsen’s motions out of order.  The protesters chanted “Let us vote” before they began to leave.

Find more at Bleeding Heartland, Radio Iowa, and the Des Moines Register.

The bill calls for the end of federal deductibility, a part of Iowa’s tax code that deducts federal taxes paid from a person’s adjusted gross income for state tax purposes. The effect is that income subject to state taxes is much lower, which in turn causes the state to institute a higher tax rate in order to generate enough revenue.

The House Ways & Means Committee approved the bill on a party-line vote Monday night.

Democrats plan to use the roughly $600 million that would be generated by ending the deduction to restructure the tax code and lower taxes for two-thirds of Iowans. Those making more than $125,000 a year would see a slight increase.

Supporters say the change would make Iowa’s tax system more fair and make the state appear more business friendly by lowering the top income tax rate from the current 8.98 percent to 6.98 percent. Opponents say it would increase taxes for thousands of small businesses, which they contend could hurt job growth.

House Minority Leader Kraig Paulsen, R-Hiawatha, said the real effect of the change would come in 2011, when federal tax cuts pushed through Congress by former President George W. Bush expire.

“When that occurs Iowans will have to pay state taxes on this increased federal tax burden,” he said. “The inability to use this deduction will result in Iowans paying approximately $125 million more in income taxes.”

But expiration of Bush’s tax cuts is also used as a reason to support ending federal deductibility. If the federal government raises taxes, the amount of money exempt from Iowa taxes is higher, said David Swenson, and economist at Iowa State University. Estimates from the Iowa Department of Revenue and Finance show Iowa losing $175 million a year in revenue beginning in 2011 if federal deductibility is kept in place.

“Eliminate deductibility, make the tax code simpler, and the issue goes away,” he said.

Supporters of the bill include Democratic legislative leaders; the Iowa Federation of Labor, AFL-CIO; the Child & Family Policy Center; and the American Federation of State County and Municipal Employees Iowa Council 61.

Opponents of the bill include Republican leadership; the Iowa Chamber Alliance; the Iowa Association of Business and Industry; the Iowa Family Policy Center; and Iowans for Tax Relief.

The editorial boards of state’s largest newspapers, The Des Moines Register and The Cedar Rapids Gazette, both endorsed ending the deduction over the weekend.

Iowa, Alabama and Louisiana are the only states that allow residents to deduct 100 percent of what they pay in federal income taxes from their state income taxes.