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STRONG IOWA
ECONOMY: REVENUE CONTINUES TO EXCEED REC ESTIMATES
On Wednesday, February 1,
Fiscal Services released the General Fund revenue numbers through the end of
January. As has been the case for the past three fiscal years, gross general
fund revenue continues to exceed Revenue Estimating Conference (REC) estimates.
Through January, total General Fund
revenue increased by $195 million, or 6.2 percent above FY 06. The REC estimate
for the entire year is $285 million, or 4.9 percent compared to FY 06. If
revenue continues to exceed the REC estimate, it is possible that the REC will
increase the estimates again in March.
All major parts of General Fund revenue
increased compared to FY 2006.
Personal income tax receipts were up by
$86 million, or 5.7 percent compared to FY 06. Income tax revenue for January,
2007, was down compared to January, 2006, but that was all due to the impact of
a withholding on a large Powerball jackpot claimed in January. 2006. If the
jackpot is excluded, income tax receipts for January were above the income tax
receipts for last January.
Sales and use tax receipts are up $25.2
million, or 2.4 percent compared to FY 06. Sales tax receipts for January were
up $18.1 million, or 18.2 percent compared to January, 2006. However, there are
some ominous signs on the horizon. Counting January, only three of the seven
months of the fiscal year have shown positive sales tax revenue growth. This
could be a sign of a possible slowdown in the economy.
Corporate income tax revenue continues
to exceed expectations. Through January, corporate income taxes (which are
based on the profitability of the state’s corporations) were up $64.4 million,
or 40 percent compared to FY 06. This is almost double the REC estimate of 24.3
percent growth.
Other tax revenue was up $15.6 million,
or 8.8 percent compared to FY 06. Inheritance, franchise and cigarette tax
receipts all showed strong growth for the month. It is important to note that
South Dakota approved a huge increase in the cigarette tax recently and at least
some of the growth is due to out-of-state smokers crossing the border. Should
Iowa raise its cigarette tax, we lose the incentive for the out-of-staters to
cross the border, which hurts other revenue sources like sales tax and gas tax
as well.
While there continues to be plenty of
good news on the revenue side, it appears that there is no end to the appetite
of Governor Culver or legislative Democrats who want increased state government
spending. Judging by the potential 10 percent increase in the Governor’s
budget, the Governor did not make any tough choices and it is unlikely the
majority party will either.
SENATE COMMITTEE
APPROVES FIRST TAX INCREASE OF 2007
On Tuesday February 6, the Senate Ways
and Means Committee approved a $1 per pack increase on cigarettes.
SSB 1055 was amended in committee to “set-aside” additional revenue in a
trust fund dedicated to health care. The Legislature has the ability to not
withstand any such provision and use the additional revenues for other spending.
The bill, which also increases the
tobacco tax, was approved on a 14-3 vote.
Cigarette Tax
The Iowa Cigarette Tax is imposed on the
sale of cigarettes and must be paid by the person making the first sale in
Iowa. Tax payment is shown by a stamp affixed to each cigarette package.
Currently, this tax is 36 cents per package of 20, and 45 cents per package of
25.
Tobacco Tax
The Iowa Tobacco Tax is imposed on the
sale of all tobacco products, except cigarettes and little cigars, at a rate of
22% of the wholesale sales price of the tobacco products.
A Cigarette Tax Increase
Fiscal Services has run estimates on
revenue increases generated by a cigarette tax increase of: 12 cents per pack,
24 cents per pack, 36 cents per pack, 40 cents per pack, 50 cents per pack, 60
cents per pack, 62 cents per pack, 70 cents per pack, 80 cents per pack, 90
cents per pack, and $1 per pack.
SECOND TAX
INCREASE: HOUSE SUB-COMMITTEE PASSES THE ‘INTERNET GENERATION ’ TAX
From Wikipedia the free
on-line encyclopedia, is this definition of the “The Internet Generation”:
“Though perhaps more accurately called the "World Wide Web Generation," the
Internet generation is an emerging term in theoretical and popular discourse to
denote the American sub-generation branching off Generation X & Y, immediately
following the MTV Generation. Born since the explosion of the home computer
market in the mid-to-late 1980s and 1990s, the defining cultural-historical
event to distinguish this cohort is that its members spent their formative years
in an age of the rise of the World Wide Web.”
This morning in
sub-committee the Department of Revenue (DOR) asked for a tax increase of over
$5 million on internet downloads. The bill,
HSB 106, would reverse a sales tax exemption on digitally downloaded goods
passed into law in 2002. The change would impose a sales tax on
anything a person downloads from the internet
music, ring tones, movies, books and
computer software. For this reason I have coined the title- the “Internet
Generation” Tax!
At the time this
exemption passed, we were trying to encourage internet use. This bill would
have a stifling effect and be a tax on our future!
I was quite stunned
when new twenty-something Representative Tyler Olson (D-Cedar Rapids) voted for
this tax increase!
If the DOR, and
democrats what to increase taxes by over $5 million do it in a stand-alone bill
not buried in a DOR non-controversial bill. |
WORKFORCE DEVELOPMENT ISSUES FINAL
DETERMINATION ON ‘CIETC’ SCANDAL
COSTS
The Iowa Workforce Development (IWD)
budget analyst who originally blew the whistle on excessive salaries
paid to the top officers of the Central Iowa Employment and Training
Consortium, last week issued a final determination letter on the
amount of disallowed Workforce Investment Act-related costs that the
job-training agency should repay to IWD. The local governing
board, however, is expected to appeal the
determination.
In a letter dated January
30, 2007, Kelly Taylor, the chief of the department’s Budgeting and
Accounting Bureau, wrote to Dave Reed, chair of the Regional
Workforce Investment Alliance (RWIA) board, Central Iowa Employment
and Training Consortium (CIETC) successor: “The combination of all
the factors identified…has resulted in a total amount of disallowed
costs, subject to debt collection, of $1,074,509. This does not
include those funds previously disallowed and currently questioned
on monitoring reports.” Taylor wrote that nearly $952,000 of the
disallowed costs included in last week’s letter came from IWD
pass-through contracts, while another $122,000 originated in U.S.
Department of Labor direct contracts with CIETC. Taylor wrote that
the board has 15 days from receipt of the letter to repay the $1.07
million, appeal the final determination, or request an extension on
the repayment.
Taylor said that based on
evidence from the State Auditor and information he received from
CIETC financial consultant Mary Gottschalk, he determined that CIETC
executives Ramona Cunningham, John Bargman and Karen Tesdell
received a total of $2,058,862 in salary and bonus compensation from
July, 2003, until the time they were terminated in April, 2006.
Taylor wrote to the board
that in the course of his analysis and informal audit resolution
meetings with CIETC representatives, “The total amount that appears
too excessive or subject to non-compliance with the regulations is
$1,307,098. However, part of that amount is related to contracts
that are neither under IWD authority or the U.S. Department of
Labor.” He noted that the $1.07 million does not include executive
compensation that was previously disallowed in a final monitoring
report
of CIETC/Creative Visions, and other excess compensation that
was questioned in a draft monitoring report of CIETC/Iowa
Comprehensive Human Services ($179,000 and $270,000, included in
monitoring reports related to the two local agencies that were
issued in July and December
of last year).
Assistant Attorney General Grant
Dugdale said he does not expect the administrative law judge
assigned to the case to issue a ruling on the disallowed costs for
several months, and that a hearing will not occur until February
2008. After that process is completed, the U.S. Department of Labor
“may accept or reject IWD’s disposition of the investigative
report,” Taylor wrote. “Therefore, this issue cannot be closed
until Department of Labor completes that possible step of the
process.”
Ways & Means
Update
Bills introduced in committee this week:
HF 39 A bill for an act allocating franchise tax revenues to local
jurisdictions.
HF 105 A bill for an act providing an individual income tax credit to
volunteer
fire fighters and emergency medical services personnel and providing
effective and retroactive applicability dates.
HF 170 A bill for an act providing an Iowa individual income
tax check off
for qualified Iowa zoos, making an appropriation and providing for the
Act's implementation.
HF 183 A bill for an act providing for an individual income
tax deduction
for contributions made to a qualified tuition program established
by a state
other than Iowa and including effective and retroactive applicability date
provisions.
HF 218 A bill for an act allowing an individual income tax deduction for
dentists who receive state medical assistance reimbursement
which is less
than their normal fee and including a retroactive applicability
date provision.
HF 219 A bill for an act providing a property tax exemption for certain
recreational property and including effective date and retroactive
applicability date provisions.
HF 228 A bill for an act limiting a tax credit and tax exemption for
pollution-control and recycling property connected to property
used for
the care and feeding of livestock, and providing for the
Act's applicability.
Bills passed out of committee this week:
HSB 107 A study bill for updating the Code references to
the Internal Revenue Code and including effective date and
retroactive
applicability provisions.
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