The Tax Debate Heats Up On ‘Funnel Week’

Left to right; Guy Vander Linden, Paul McKinley and Tom Rielly take questions from those in attendance at Eggs and Issues Saturday

Oskaloosa, Iowa – Traditionally, the halfway point of the legislative session is called ‘Funnel Week’, which is a self-imposed deadline of sorts that helps to limit the number of bills open for debate. Tax bills, some amendments, along with budget related bills might be exceptions, but anything else that has not cleared committees in either house will be ineligible for debate this year.

This week’s Eggs and Issues was the fourth, of the scheduled six, for this year. This means the yearly tradition, that is the envy of most every other district in the state, will soon be done for the season as well.

There are many issues being debated by both houses of the Iowa Legislature, but none are burning hotter than the property tax debate. With the hot debates, decorum was nearly out the window at times.

Iowa Senator Paul McKinley (R – Chariton), during his opening statements, made remarks over his outlook concerning education, which Senator Tom Rielly wasn’t in agreement with. “Well, listening to Senator McKinley you would think we’re a bunch of backward, knuckle draggin’ hillbillies,” Rielly said when he was given the mic for his chance at an opening remark. “I don’t think we’re that bad, we’re trying to work our way through the education reform. I think we’re always going to strive to do better. I don’t think we have a bunch of knuckleheads for kids that are coming out of our high schools.”

Senator Rielly (D- Oskaloosa) Chairman of the Senate Transportation Committee, who has been a major proponent of the 10 cent gas tax increase, is facing a tough road ahead with the recent poll from the Des Moines Register showing 68% of Iowan’s against the increase. “How else will we come up with 220 million dollars, on a consistent systematic basis, to fix up our roads and bridges; to make them safe, to put 5,000 people back to work. I’m open to any idea. We can’t kick this can down the road.”

The gas tax was killed by the House Transportation Committee and appears to be stopped at this point. “I don’t know how big of a majority you need to hear that people don’t want it, but the people don’t want it.” Vander Linden said about the gas tax bill and the recent Register poll.

“I’m glad to hear Senator Rielly talk about property tax. I wish he could get his colleges to talk about property tax. There are now four bills laying in their IN basket over there [senate], and I don’t care if they vote against them, I don’t care if they talk about them badly, I’d just like them to do something,” Guy Vander Linden (R- Oskaloosa) said in his opening remarks.

“Sixty percent of Iowans say they favor the kinds of provisions that are in the house property tax bill, and I think it’s time the senate at least discussed the issue.”

Oskaloosa Mayor Dave Krutzfeldt asks a question of the 3 legislatures Saturday

Oskaloosa Mayor Dave Krutzfeldt spoke of the concern that cities and counties have over the property tax bill and the reduction in the rate that would be paid by landowners. “Cities and Counties still need to do their job as well as the schools. Our attention in bringing this up is to say hey, if the state can control the property tax rates, we would certainly like to be made whole, back-fill if you will that amount of money that would be removed from commercial property tax adjustments and then give back to the cities, schools, counties.”

Krutzfeldt also asked about a streamline sales-tax legislation that could put money into the state’s coffers by the collection of inter-state sales tax. “How do you feel about back-filling revenues to the local entities using that new source of funds?”

“You’ve hit the heart of the debate between both the house and senate. The senate version, we’ve designed it to be more targeted and not quite as huge. We’re trying to target places like Smokey Row, like Big Ed’s, like Mi Ranchito, Eric Palmer’s law firm. These are main street businesses and our property tax reform is basically like your residential rollback. We fully implemented the first $390,000 of assessed value would be treated just like the residential rollback.” Was how Rielly began to answer Krutzfeldt’s question.

“Then, and the only time we would fund it, is it would grow as if the state is growing. So we’re taking a more conservative approach, we want to make sure we’re not spending money we don’t have and that we’re honoring our commitment to you [city, county, school]. So any time the state is growing by 4%, we’ll add another 50 million to the fund and it tops out at 200 million dollars. When all said and done, when it’s fully implemented, once we get it all up and running, it might take a couple of years to get there. Somebody thats got $390,000 assessed value, they could see upwards around $6,000 off of their property tax bill. That’s big.”

“Now with all due respect to Rockwell-Collins Pioneer, this probably wouldn’t really effect them one way or another. But you know what they do get, they get refundable research tax credits. You don’t get that; I don’t get that; as a small employer. We’re trying to help out the small guy and to give a helping hand to the small guy. The house version, I’m concerned. I don’t care how they prop it up and shape it, this will be a huge property tax shift to ag and residential. I don’t see how it’s not, because they’re not, they won’t tell you, they won’t admit they’re not going to fully fund and back-fill cities and counties. Our approach is probably more targeted, but we recognize we need to honor our commitment to local communities.” Rielly said in answering Krutzfeldt’s question.

“We got to keep our eye on the ball.” Vander Linden said about the property tax question. “The purpose of cutting commercial property tax is to create a climate to attract business to Iowa, and to allow those that are already here to thrive and grow.”

“The senate bill does nothing. You’ve got to get 4% straight growth before anything kicks in, and when it does kick in, it’s nothing. The house bill back-fills schools by raising that rate from 87.5 to 100 percent. There’s another back-fill to help local government. It isn’t going to fill all your gap, but it’s going to help, and we create that climate that I’m talking about. As the Senator says, it’s going to take a couple of years for the senate bill to do anything. We can’t wait a couple of years to get this economy back on it’s feet. The house bill would take immediate action, and that’s the kind of thing we need.”

The trio faced tough questions from the audience, and traded barbs for the nearly hour long debate

Vander Linden then addressed the stream-lined sales tax, “I serve on a couple of committees that deal with that. It is an effort to collect sales tax that is due Iowa that should be paid from out-of-state. I don’t think it’s going to be a significant amount of money, in relation to property tax, but it’s a possibility. Certainly we could consider that.”

Senator Paul McKinley (R- Chariton) agreed with Vander Linden that the stream-lined sales tax won’t be a significant amount of money. “One of the factors in this equation is spending. We can either maintain through growth of properties, for more people to spread the taxes more equitably, or we can look at how much we spend and reduce spending through reform. Trying to maintain and efforted continuation of offering of services. That’s the proposal that I would be in favor of is. Let’s control the spending, and that’s something we really haven’t done enough to talk about.”

McKinley went on to say that the House Republicans budget proposal spends less than 98% “of all incoming revenues, allowing us to have sound fiscal footings” while the Senate Democrats, “in their budget spend 102% of the budget. In spite of what Tom [Rielly] will tell you, they spend 102%. It’s really fiscal responsibility.”

Senator Tom Rielly said that the senate did pass the stream-lined sales tax. “We’re not spending 102, by law we can’t. We spend 99%. Actually, we’re spending what the Governor’s proposing too. We released our targets, it’s 97%. It’s just a matter of who you believe.”

The property tax will continue to be a topic of heated debate. As evidenced by this exchange, Democrats and Republicans, House and Senate still have some distance in their plans for property tax in the State of Iowa.