Voters are Energized
Over 186,000 Iowa Republicans cast ballots on caucus night this week, setting a new record for total turnout and participation. Many attendees were first-time caucus-goers, showing that Iowans are clearly energized, enthusiastic, and ready for a change of president. I was honored to speak at my own Precinct on caucus night where 274 people showed up!
What is Coupling and Why is it Important?
The coupling bill updates Iowa law to conform to certain tax changes enacted by Congress. It is always important that this bill is passed quickly as tax preparers and accountants need to know what deductions Iowans can take on their 2015 income taxes. If the Legislature fails to act on coupling, the result is a $96 million tax increase on hardworking Iowans. Section 179, of the tax code, allows businesses to write off capital investments, benefiting more than 70,000 businesses and individuals each year. Failing to couple with Section 179 will disproportionally hurt our small businesses and farmers that have made investments at a time when they’re already facing many challenges and uncertainties. House Republicans know that incentives like Section 179 allow small business owners to make investments and grow jobs in their communities. House Republicans are committed to giving taxpayers a seat at the table, which House File 2092 accomplishes. The tax coupling bill has an impact on the FY 2016 ending balance and the FY 2017 on-going revenue levels. Any agreement will impact discussions on school aid and budget targets. The Governor has already recommended a plan for coupling that has a negligible effect on FY 2016 revenue while adding an additional $48.5 million to FY 2017. The Governor’s plan is to not couple at all for tax year 2015. That means that taxpayers would not be able to take advantage of any of the tax extenders Congress just passed that have an Iowa component when they do their taxes this April. The Governor then recommends permanently coupling with the IRC in tax year 2016 with the exception of Section 179 expensing or bonus depreciation. The Governor’s plan permanently leaves out those provisions. Section 179 expensing is an accelerated depreciation mechanism for business purposes and bonus depreciation is something similar to that except for larger expenses. The Governor’s recommended coupling provisions are estimated to have a negligible impact on FY 2016 General Fund revenues while increasing FY 2017 General Fund revenues by $49.2 million. The House approved a different plan on Thursday, Jan. 28. The House plan couples with everything except bonus depreciation in tax year 2015. It also does not add the permanency of the Governor’s plan. There is a $95.7 million impact on FY 2016 revenue/ending balance. That money goes directly to taxpayers. Additionally, $86.5 million is added to FY 2017 on-going revenue with roughly $55 million of that available for appropriation under the state’s expenditure limitation law. Senate Democrats have given no indication on their plan for tax coupling which complicates and slows down the budget process this session
Senate Democrat’s Puzzling Budget Numbers
Senate Democrat’s released budget targets which spend about $70 million more than the state collects in on-going revenue. As a percentage, they spend 101.1% of on-going revenue. Senate Democrats did not release their plans on Medicaid savings or tax coupling or even a simple balance sheet which makes it difficult to see a complete picture of their spending plans.
As part of their targets they propose an early retirement plan that “saves” taxpayers $10.6 million. House Republicans are extremely skeptical that is a reliable number. Last session Senate Democrats proposed a similar plan which resulted in zero savings. It was rejected by House GOP budget negotiators.
Senate Democrats are proposing a 4% increase in Supplemental State Aid for schools but the money necessary to fund that 4% increase is not included in their budget targets. To fund 4% they need to provide an additional $65.8 million in spending within the target for the Standings Bill. But only $2.9 million more is provided. That means either they have cut another area included in the Standings Bill – such as property tax credits – or they are willfully underfunding their 4% SSA increase and instead forcing property taxpayers to pay more to make up for their lack of funding.
Visitors at the Capitol
Dr. Anthony D. Voss, Superintendent of Hudson Schools