|
WAYS
& MEANS PASSES PENSION AND SOCIAL SECURITY TAX PHASE-OUT
On Wednesday, February
23, the House Ways & Means Committee approved House File 26.
House File 26–
An Act phasing out the state
income tax on social security
benefits and on pension and retirement income.
Currently, Iowans pay
income tax on pension income above $6,000 (single filers) and
$12,000 (married, joint filers).
Iowans also pay income
tax on social security benefits above $25,000 (single) and
$32,000 (married, joint).
No more than 50 percent
of social security benefits can be taxed for Iowa individual
income tax purposes.
85 percent of social
security benefits received can be taxed for federal income tax
purposes.
Beginning in calendar
year 2006, House File 26 reduces the Iowa individual income tax
on pension and social security benefits over a five year period.
HOUSE GOP UNVEILS BUDGET PRIORITIES
Plan
includes increases to education, health care and public safety
without raising taxes
House Republicans
unveiled their budget proposal today, which increases funding to
education, health care and public safety without raising taxes.
Republicans’ proposed
budget spends an additional $70 million in fiscal year 2005,
mostly on a supplemental appropriation for Medicaid, for a total
general fund appropriation of $4.589 billion. The proposal
would allocate an additional $239 million in fiscal year 2006,
for a total of $4.828 billion.
“We have increased
funding on government’s most important responsibilities,” said
Rep. Bill Dix, Republican from Shell Rock and chair of the House
Appropriations Committee. “We did this without raising taxes. If
this spending increase can be sustained without additional
revenues, I challenge anyone to tell me why a tax needs to be
raised.”
Republicans fully fund
Medicaid, including a three percent provider increase at the
Governor’s recommended level of $129 million. Also funded is an
$82.1 million, four percent allowable growth for K-12
education. Higher education, teacher preparation and early
childhood initiatives will receive a $40 million increase, while
the Department of Corrections will receive a $5 million
increase.
“We have taken the
Auditor’s advice and attempted to add clarity and long-term
planning to the budget process,” said House Speaker Christopher
Rants, R-Sioux City. “We have constructed a two-year budget, and
we address the repayment of funds borrowed to balance the budget
in previous years.”
In their budget,
Republicans addressed the Auditor’s concern of looking ahead to
fiscal year 2007, where with a modest four percent revenue
growth, spending contained in the upcoming year’s budget can be
sustained. Also, the budget will repay a large amount to the
Cash Reserve Fund and Senior Living Trust Fund while writing off
the amount owed to the Tobacco Endowment and other funds that
are not required to be repaid by the Code.
“This is a responsible
budget,” said House Majority Leader Chuck Gipp, R-Decorah. “We
cannot ask the taxpayers, who already spend nearly $5 billion a
year on state government, to spend nearly $1.5 billion to repay
borrowed funds. Like a private sector company, we are prepared
to state that the funds owed the Tobacco Endowment and the funds
not required to be repaid by current law will be written off.
This is the only way to repay the cash reserves and Senior
Living Trust Fund without asking the taxpayers to put in more of
their hard-earned money. We put the Iowa taxpayer first with
this budget.” |
AUDITOR: GOVERNOR’S FY 2006 BUDGET ‘MISLEADING, IRRESPONSIBLE’
On Monday, February 21,
State Auditor Dave Vaudt presented his review of the Governor’s FY
2006 budget recommendations. The Auditor criticized the Governor
for a lack of budget clarity, spending exceeding revenue, and a lack
of long-term planning.
In his report, the Auditor
states “The Governor’s budget continues to lack the clarity needed
to make meaningful spending comparisons. While the Governor’s FY 06
budget purports to spend $4.971 billion, it does not take into
account shifted expenditures, salary and benefit increases and
Medicaid supplements. With these added in, the Governor’s true
total expenditures swell to $5.4 billion. That’s a difference of
more than $400 million when compared to the Governor’s figure. This
lack of clarity presents a big obstacle to making good budgeting
decisions.”
The Auditor continues, “The key to
responsible budgeting is to bring expenditures in line with
revenues. Despite revenue growth and a tobacco
tax increase, spending in the Governor’s budget proposal will exceed
revenue by over $300 million.”
Finally, the Auditor concludes, “Since 2000,
Iowa has tapped over 30 funds and special accounts in order to
balance the budget, a practice that continues with the Governor’s FY
06 proposal. Despite claiming to increase the cigarette tax to pay
for Medicaid, the Governor recommends spending $136 million from the
Senior Living Trust Fund (SLTF) for Medicaid, which will deplete the
SLTF in FY 06. None of that money has been directly spent to
further the SLTF’s goal of creating a comprehensive at-home care
system for Iowa’s seniors. What is the plan for FY 07? Long-range
planning would have identified the issue and permitted us to plan
for and impact the future rather than just react to it.”
Ways
& Means Update
Bills introduced in committee this week:
House File 311 -A
bill for an act relating to tax credit certificates issued by the
Iowa capital investment board and providing an effective date.
HSB 204- A study
bill creating a credit from withholding for certain businesses
moving operations to Iowa and providing effective and retroactive
applicability dates.
HSB 205 - A study
bill providing for the property taxation of the facilities of
city-operated cable communications systems and including effective
and applicability date provisions.
HSB 206 - A study
bill relating to horse racing, including fees for breeders of
certain native horses and minimum racing days and supplemental
purses for registered Iowa-bred horses.
HSB 207 - A study
bill providing a deduction in computing the individual income tax
for certain un-reimbursed expenses relating to a human organ
transplant and including a retroactive applicability date.
Bills passed out of
committee this week:
House Study Bill 19-
A Joint Resolution proposing an amendment to the Constitution
of the State of Iowa to require approval by vote of the people
before certain tax or fee increases take effect.
House File 26- An Act
phasing out the state income tax on social security benefits and on
pension and retirement income.
|
Week
in Review Archives