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How the different state tax proposals would impact Iowans

DES MOINES — The changes to Iowa’s tax laws have the potential to be dramatic, impacting every Iowan who pays taxes for years to come.

Similarly, the changes could impact every function of state government because of what could be a reshaped state budget.

But what would it mean for Iowa taxpayers and businesses?

Republican state lawmakers, who hold agenda-making majorities in the Iowa House and Senate and occupy the governor’s office, are working on plans to overhaul the state’s tax code.

Two plans have emerged.

Both reduce income tax rates for Iowa workers. One also cuts taxes paid by Iowa businesses.

But within the plans are significant differences. The Senate plan, for example, goes much deeper with the tax cuts, thus providing more tax relief for Iowans and businesses, but also taking much more money out of the state budget.

Eventually the two plans will have to be merged into one.

The Senate introduced its plan and approved it this past week, in rapid fashion.

Charlie Neibergall 

Iowa Gov. Kim Reynolds delivers her Condition of the State address before a joint session of the Iowa Legislature, Tuesday, Jan. 9, 2018, at the Statehouse in Des Moines, Iowa. (AP Photo/Charlie Neibergall)

The House this past week began work on tax reform, choosing to work off a proposal introduced earlier in February by Gov. Kim Reynolds.

Here is how the plans compare.

Iowans pay less

Both plans will reduce the amount of taxes paid by Iowa workers.

Under the Senate plan, the number of income brackets would be reduced from nine to five, with the top bracket paying 6.3 percent, down from almost 9 percent.

The governor’s plan also reduces rates but does not change the income bracket structure.

So what does that mean for Iowa taxpayers?

Under the governor’s plan, by full implementation in 2023 Iowans making between $40,000 and $60,000 annually would pay roughly $200 less in taxes each year, a reduction of around 12 percent.

Under the Senate plan, Iowans in that range would pay roughly $600 less, a reduction of around 25 percent.

The estimates were compiled by the state budget department for both tax plans.

On the higher end of the income scale, Iowans who make between $100,000 and $125,000 would pay $365 less under the governor’s plan and $872 less under the Senate plan, according to the budget department projections.

In short, the Senate plan calls for bigger income tax cuts, meaning Iowa taxpayers would pay less under both plans, but less under the Senate plan than the governor’s.

But that comes at a cost to the state.

A break for business

Perhaps the biggest difference between the two plans impacts taxes paid by Iowa businesses.

Reynolds’ plan does not include a reduction of the state’s corporate tax rate; the governor said the state budget cannot withstand the additional loss in revenue, and that further study of the state’s myriad tax incentive programs needs an in-depth study before business tax rates should be lowered.

Republican Senators do not think they need to wait. Their plan makes significant reductions to business taxes, lowering the top rate from 12 percent to 7 percent, and going from four tax brackets to two, taxed at 7 percent and 5.5 percent.

The changes would have a significant impact, reducing businesses’ tax burden by more than 50 percent, almost $265 million, according to the budget department estimates.

Businesses that make between a quarter-million and $1 million would receive the most significant savings from the Senate plan: an average reduction of more than $95,000, according to the projections.

Businesses that make more than $1 million would see a more modest reduction: just more than $5,000.


“This bill creates dramatic economic development and it says that we’re open for business,” said Randy Feenstra, a Republican state senator from Hull who oversaw the Senate plan. “We want to be a business-friendly state. We want to be bold. We want to grow.”

Smaller state budget

Both plans would mean tax relief for Iowa workers, and the Senate plan would also mean tax relief for Iowa businesses.

But that also means less money coming into the state budget.

And that reduction is vastly different in the two plans.

The governor’s plan anticipates state revenue will be reduced by $1 billion over the next six years.

The Senate plan would match that in one year.

Under the Senate plan, state revenues would be reduced by more than $4 billion over the next six years.

Republicans hope the revenue losses are not as significant as projected; they say economic growth as a result of the tax cuts could create some new revenue growth.

“Yes, this is bold,” Feenstra said. “Senators, we must be bold if we want to drive Iowa’s economy by creating higher wages, more jobs and more opportunities.”

The governor’s plan would trim state revenue by just more than $88 million in the state budget year that starts July 1 of this year, and gradually increase to a nearly $300 million reduction in the state budget year that begins July 1, 2022.

The Senate plan would cut state revenue by more than $200 million in the next state budget year, and increase annually to the point where it would reduce state revenue by more than $1 billion annually in the state budget years that start July 1 of 2021 and 2022.

Iowa’s entire state budget this year was just more than $7 billion.

Opponents of the plan, most prominently Democratic state lawmakers, fear such significant budget reductions would wreak havoc on the state’s finances and devastate the functions funded by state government.



“This is, in my opinion, the height of fiscal irresponsibility. Reducing the state of Iowa’s revenue by $1 billion will have a catastrophic consequence to public education, public safety, and managed health care,” said Matt McCoy, a Democratic state senator from Des Moines. “We are taking a drastic, dark and disastrous path.”

Turning two plans into one

Before any of the aforementioned proposals become law, one plan must emerge from the Iowa Legislature and be signed by the governor.

Senate Republicans have already approved their plan.

House Republicans have chosen to work off the governor’s proposal, and have just begun that work.

Since it appears likely the plans will have differences — some of them significant — Republican leaders from the Senate, House and governor’s office eventually will have to work together to construct one compromise proposal. That final legislation could contain elements from both plans.


“We’re not going to preclude any topic at this point, I don’t think,” said Iowa House Speaker Linda Upmeyer, a Republican from Clear Lake. “The Senate sent a bill that they have an interest in doing and the governor has a bill. And we’re going to see what we can do to come up with something that’s just good for Iowans.”


Decrease in state funding appropriations may impact North Iowa state parks

In 2009, following one of the worst floods in recent state history, the state allocated about $22 million for the Iowa DNR. 

Now, the DNR has around $11.17 million in state funds to work with — and officials say any further cuts could drastically impact the operation of state parks, including those locally.

According to the DNR's latest budget presentation to the state Legislature's Agriculture and Natural Resources Appropriations Subcommittee, 43 percent of the state's appropriations are allocated to state parks. Another 15 percent funds the agency's forestry division.

Tammy Domonoske, park manager for McIntosh Woods State Park in Ventura, said via email she will not know how her park will be impacted until state legislators determine how much will be allocated in the upcoming fiscal year.

Two local park rangers — Josh Rembe from Clear Lake State Park and Michael Strauser from Pilot Knob State Park in Forest City — deferred comments about funding to Alex Murphy, a DNR spokesman.

Murphy agreed with Domonoske, saying "until a bill is passed for deappropriations, we can’t speculate exactly how it will impact state parks."

DNR Director Chuck Gipp, however, expressed concerns if further cuts are made.

"Any further reduction of GF (general fund) support will make it increasingly difficult to staff all of our parks," Gipp said in an email.

Outside of state parks, other DNR officials said while they are impacted by state funding, the consequences probably wouldn't be as severe. Jeff Vansteenberg, supervisor for the DNR's Mason City field office, said the department has 260 different funding streams, ranging between numerous state and federal programs.

According to Vansteenberg, the complexity of these mechanisms means different areas of the DNR need to meet certain federal and state regulations to receive funds. He added that 15 full-time employees work in his office, down one employee since 2009.

"A lot of people think the DNR has one big bag of money and that everyone reaches into it," Vansteenburg said about funding streams. "But that’s not the case."

Vansteenburg believes the recreation and environmental side of the department may see more of an impact, which includes state parks. T.J. Herrick, who manages the Ventura Marsh, agreed with that assessment.

Herrick, who said there are five full-time employees in his office, said a bill in the Legislature could bring more money into the department, specifically for those on the recreation side.

"We haven’t had a license increase fee since the 90s," Herrick said. "So the cost of everything has gone up, and we’re doing more with less all the time."

CHRIS ZOELLER, The Globe Gazette 

Four-year-olds Ryann, right, and Hadley Miles of Omaha chase after butterflies at the Clear Lake State Park beach in July 2015. 

According to Herrick and other DNR officials, however, the impact across the DNR — while state and federal funds have dipped — won't be as detrimental as what state parks may have to deal with, especially if the state decides to allocate less money to the department.

State parks already may be stretched thin, according to DNR statistics. Almost 40 percent of all parks have less than one full-time employee, and 37 percent have exactly one full-time employee. Currently, there are 112 full-time employees scattered across all of Iowa's state parks.

That doesn't include seasonal staff, which dropped from 240 people in 2016 to 150 people last year.

According to both Strauser and Herrick, state parks heavily rely on state appropriations to operate. 

"(I believe) there is no other funding mechanism for the state parks," Herrick said. "In Iowa, we don’t have a user fee for parks, and that’s basically what a hunting and fishing license is for, to charge those who use that."

Deb Kozel, a senior fiscal legislative analyst in Iowa's legislative services agency, said the only park facility she knows has closed so far is the Springbrook Education Center at Springbrook State Park in Guthrie Center, which shut its doors last year.

 Given current staffing levels, Kozel said the DNR may not be able to replace any park rangers who step down — and thus, some parks' services could be shut down.

"They (DNR officials) have said if the money keeps quitting ... if a ranger were to retire or whatever, they would have to close that state park," Kozel said. "But that hasn’t happened yet, to the best of my knowledge."

Correction: A previous version of this article listed Tammy Domonoske as a park ranger. She is actually a park manager. The Globe Gazette apologizes for the error.

CHRIS ZOELLER, The Globe Gazette 

McIntosh Woods Park Ranger Tammy Domonoske entices a herd of 40 goats with a bucket of feed as she moves the herd to a new area to eat nuisance vegetation in Ventura in October 2016. 




Mason City Council to decide on tax levy increase Tuesday

MASON CITY | Mason City Council members will hold a public hearing about a proposed 12-cent increase in its city tax levy, among other actions.

Interim City Administrator Kevin Jacobson informed the city council at its meeting on Feb. 20 that the total city property tax rate for fiscal year 2019 will be $13.83 per $1,000 of assessed valuation, compared to $13.71 for fiscal year 2018.

At Tuesday's meeting — following any possible comments from the public — council members will decide whether to adopt a resolution approving this increase and other aspects of the city's upcoming annual budget for FY 2018-19.

In other news, Mayor Bill Schickel has recommended that councilman Will Symonds should be appointed to the city's Housing Rehabilitation Committee. 

Jacobson has also recommended that council members approve forgivable loans for rehabilitation projects on the city's North End and at Pro's Sandwich Shop.

In the North End proposal, property owner Russ Hardy is asking for a Corridor Revitalization Loan worth $30,000, for a building that once housed Pete's Place Bar and the B&O Drug Store.

The Corridor Revitalization Loan Program is intended to help business property owners improve their buildings. Applicants can ask for a loan up to $30,000, as long as they can match the loan.

Hardy's application for the loan states that he wants to "whitebox" 1335 and 1337 N. Federal Ave. into two storefronts, and make them available to lease to possible restaurants, retail stores or other related businesses.

He also intends to build four two-bedroom apartments on the second floor, according to the application. He estimates the total cost of the project is just under $340,000.

In the Pro's Sandwich shop proposal, city officials have recommended the city council award the shop's owners, Allen and Lois Awe, a Corridor Revitalization Loan of $24,054.77.

According to their application, the Awes request the loan for exterior building work, and to resurface their parking lot. The total cost of their project is just over $48,100, according to the loan application.

'Culture of the community': Finalists discuss appeal of Mason City, challenges of prior positions

There is no mention of the city council picking a new city administrator on the meeting agenda. After their meeting Feb. 20, council members met in closed session for about an hour, presumably to talk about the five finalists.

Council members again met in closed session Feb. 27 for just under two-and-half-hours, according to city documents.

According to Iowa law, a governmental body may meet in closed session "to evaluate the professional competency of an individual whose appointment, hiring, performance, or discharge is being considered when necessary to prevent needless and irreparable injury to that individual’s reputation."

The city council is scheduled to meet 7 p.m. March 6 in the Mason City Room at the public library.