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House
Approves Pay Freeze Resolution
On
Wednesday, January 28, the House approved HCR 104, a resolution
calling on the Governor and state employee unions to go back to
the table and negotiate a pay freeze for FY 2005.
In
his FY 05 budget recommendations, the Governor did not include $69
million for salaries increases and forced the departments to pay
for the raises without funding.
This will mean the departments will be forced to layoff
younger employees in order to fund the raises for the veteran
employees.
This
resolution calls on the unions and the Governor to go back to the
table and agree to a wage freeze for FY 05.
An amendment was added to call on the unions to call for a
vote of their members on whether or not to accept a pay freeze.
If the unions would agree to a pay freeze, non-union
employee pay would also be frozen and it would save the general
fund a total of $69 million and prevent most layoffs.
Over
the course of the past six years, Iowa has seen a 40 percent
increase in the salary cost of its employees.
That is an average annual increase of more than 6 percent
in wages, which is not sustainable even in the best of times - let
alone during hard times like these.
This
pay freeze will ensure that the state does not have massive,
across-the-board layoffs where hard-working Iowans will lose their
jobs altogether. Layoffs
will only lead to even more serious problems serving the most
needy and vulnerable in our society.
Also, those who will lose their jobs will likely be younger
workers with less seniority. These are exactly the type of people
who may feel forced to pick up their families and leave the state
to find opportunity elsewhere.
As the state looks to grow its population, this is the
wrong way to go about it.
Iowa
is not alone in suggesting a pay freeze for its employees.
Many of neighboring states have successfully worked with
their public employee unions to prevent layoffs and ensure the
delivery of services in this way.
Local bargaining units in Iowa have done the same. The time
has come for everyone to come to the table and negotiate a fair
solution for the union employees as well as the taxpayers.
Tax
Collections
In
1993, the state collected just over $4 billion. In 2003, the state collected $5.9 billion.
Various lobby groups contend that the Legislature has
enacted somewhere between $800 million and $1 billion
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in
tax cuts over the last 10 years leading to a lack of revenue for
education and other needs. Even if that were true, then what has happened to the other
$900 million? (Fiscal
Year 2003 Annual Report, Iowa Department of Revenue)
If
you just look at income and sales taxes, the state is collecting
about $1.5 billion more now than it did in 1993. (Fiscal
Year 2003 Annual Report, Iowa Department of Revenue)
Expanding
the Sales Tax Base
In the weeks since the Governor
called for the Legislature to increase taxes by “expanding” the
sales tax base to include services that haven’t been taxed, many
questions have arisen.
According
to the Governor, this is just a tax on high end business services.
In his Condition of the State Message, he stated, “Bottom
line under this sales tax modernization proposal: a few will
pay more, most will pay less and all will benefit…”
So,
isn’t this just a tax on the businesses that perform these
services?
This
is a 5% sales tax on anyone who utilizes the service. For example: At
tax time, a 78-year old widower goes to his CPA to have his taxes
prepared. His
accountant charges her $100 for tax preparation; on top of that he
will be charged at least an additional $5 in tax.
For someone on Medicaid, that $5 could be his monthly expense
for prescription co-pays.
What
about our border states? Do
they tax these services?
Illinois,
with their 3% flat income tax rate does not tax any of these
services. Wisconsin and
Missouri only tax computer rental and leasing.
Nebraska only taxes computer programming, computer integrated
systems design, and computer rental and leasing.
Minnesota taxes all of the above services, at 6.5%.
And finally, our 0% income tax neighbors in South Dakota, tax
all of these services at 4% (plus local option taxes).
Ways
& Means Update
Bills
introduced in committee this week:
HF 2028 An
Act exempting certain environmental test laboratory services
from
the state sales and use taxes.
SF
297
An Act relating to the regulation of snowmobiles and all terrain
vehicles, establishing fees, providing penalties.
Bills passed out of committee
this week:
No bills passed committee this week.
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