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Gov. Vilsack Presents the
State of the State Address: Calls for Largest Tax Hike in State
History
On Tuesday, January 13th,
Governor Vilsack delivered his Condition of the State address and
proposed one of the largest tax increases in
Iowa
history.
Tax Increase #1: Impose
new tax on services
Tax
amount: $194 million
(estimate)
Since
Gov. Vilsack did not lay out any specific services, one can only
assume for the time being that he wants to impose a sales tax of
5% that would include all services that are not currently taxed.
Services could include:
Tax Return Preparation Service, Adjustment & Collection
Services, Credit Reporting Services, Secretarial and Court
Reporting, Medical Doctors, Offices of Dentists, Offices of
Chiropractors, Offices of Optometrists, Offices of Podiatrists,
Skilled Nursing Facilities, General and Medical Hospitals,
Specialty Hospitals, Medical Laboratories, Dental Laboratories,
Home Health Care Services, Kidney Dialysis, Specialty Outpatient
Facilities, Legal Services, Libraries, Data Processing Schools,
Vocational Schools, Individual and Family Services, Job Training
and Related Services, Child Day Care Services, Residential Care,
Management Consulting Services (this would include establishments
primarily engaged in furnishing operating counsel and assistance
to managements of private, nonprofit, and public organizations.
Bottom line:
Citizens in need of these services would be paying the tax.
It wouldn’t be a tax on the business itself.
Tax
Increase #2: 60-cent
increase on cigarette tax
Tax
Amount: $121.3 million
(estimate)
Currently,
Iowa
imposes a 36-cent tax on each pack of cigarettes.
A 60-cent increase would push
Iowa
’s rate to 96-cents.
Iowa
’s surrounding states tax cigarettes at the following rates:
Illinois 98-cents;
Minnesota
48-cents;
Missouri
17-cents;
Nebraska
64-cents;
South Dakota
33-cents;
Wisconsin
77-cents.
Bottom
line: Rather than
increasing the tax to discourage smoking, Vilsack wants to
increase the tax to increase government spending.
Tax
Increase #3: Combined
Corporate Income Tax Reporting
Tax Amount:
$30 million (estimate)
Gov.
Vilsack billed this tax increase as “closing corporate
loopholes.” Combined
reporting actually requires a corporation with any reporting
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requirement in
Iowa
to combine all its subsidiaries and file an
Iowa
return based upon an apportioned allocation of tax liability between
Iowa
and all federal jurisdictions. It
assumes that when a strong central management structure exists
somewhere in the United States, that all the subsidiaries are
subject to this structure and may be combined under it for reporting
purposes.
Bottom line:
increases taxes on business.
A new tax on
businesses doesn’t send the message that Iowans want new jobs, and
it certainly doesn’t foster economic development.
=TOTAL
TAX INCREASE: $345.3
MILLION.
Appropriations
Passes 98 % Spending
Limit
On Wednesday, the House Appropriations Committee approved
a bill which lowers the expenditure limitation from 99
percent to 98 percent beginning in FY 06.
The
bill is one of the “budget tools” that will help prevent the
problem of FY 01 and FY 03 from happening again.
In both fiscal years, the REC was off by only 1.1 and 1.2
percent, respectively, and had the cushion been larger, no deficit
spending would’ve occurred.
The 98 percent
limitation would require that the Legislature and the Governor leave
a larger ending balance to deal with lower revenue estimates.
For instance, had the legislature approved a 98 percent
budget in FY 04 instead of a 99 percent budget, the Governor would
not have had to do an across the board cut when revenue was reduced
in October.
The
Governor has expressed opposition to the plan because he wants to
spend the additional one percent.
Last
September
State
Auditor David Vaudt and Rep. Jamie Van Fossen,
chairman of the
House Ways
and Means Committee, called for changing the amount lawmakers and
the governor can spend according to state law. (DM Register 9/2003)
Ways
& Means Update
Bills
introduced to and passed out of committee this week:
HSB 500- An
Act relating to the phase-out of the sales and use taxes on the sale
and furnishing of gas, electricity, and fuel to residential
customers.
Bills passed out of committee
this week:
HSB
500- An Act relating to the phase-out of the sales and use taxes
on the sale and furnishing of gas, electricity, and fuel to
residential customers.
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