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HOUSE
COMMITTEE TO DEBATE BUDGET PROTECTION MEASURE
This week, the House Appropriations Committee is set to
debate HSB 698, which applies the 99 percent expenditure
limitation to special sessions, increases the Economic Emergency
Fund (EEF) from 2.5 percent to 5 percent and creates a new Surplus
for Taxpayers Fund.
It is a fiscally
responsible policy to apply the 99 percent limitation to special
sessions because it prevents the Governor and Legislature from
waiting to do a budget until a special session so they can spend
100 percent of revenue. Also,
the bill is in the spirit of compromise with the Governor.
Since he was unwilling to approve the 98 percent
limitation, applying the 99 percent limit to special sessions is a
reasonable compromise.
Increasing the EEF from 2.5 percent to 5 percent will mean
that when they are filled, the Cash Reserve Fund and EEF will
contain 12.5 percent of the budget.
The extra 2.5 percent in reserves will help provide a
cushion should another economic downturn occur in the state.
Finally, the bill establishes a Surplus for Taxpayers Fund.
After the reserves are filled to 12.5 percent and the
borrowings repaid, any surplus would be deposited into the Surplus
for Taxpayers Fund. This
is a good policy because it prevents the Legislature and the
Governor from building one-time money from one year into the
following year’s budget. Also, since collecting more money from taxpayers than created
the surplus was needed for the budget, the money should be
returned to the taxpayers.
GOVERNORS
TAX INCREASE IS HERE: THE DETAILS
After
nearly eight weeks of anticipation, Governor Vilsack’s office
finally released the most controversial bill of the 2004
legislative session. Twelve
divisions and more than 20 pages long, the bill – LSB 5530 - has
more than tax increases within its contents.
The tax bill does the following:
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Sets the sales tax rate on utility bills at 2% for July-December
2004, 1% for 2005 and 0% for 2006 and subsequent years.
This schedule reinstates the phase-out of the sales tax
that was approved by the Legislature and signed by the Governor
during the 2001 session.
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–
Increases taxes on businesses by requiring combined corporate
reporting.
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Increases the cigarette tax by 60 cents.
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Adds the following services to be taxed:
- Engineering
- Accounting,
auditing, billing, bookkeeping, payroll, tax return prep.
- Public
services
- Computer
services
- Consulting
(except lobbying)
- Management
services
- Architectural
services,
- Information
retrieval
- Adjustments,
collections and credit reporting.
Interestingly
the Governor specifically decided NOT to charge sales tax on
lawyers or lobbyists.
TAX
INCREASE PART II
Rep.
Ed Fallon (D-Des Moines) is set to introduce a $368 million dollar
tax increase that repeals the 10% across-the-board income tax cut,
raids the road fund for $7 million.
The
bill repeals several sales tax exemptions including Internet sales,
hospitals, argon gas, aircraft parts, printers, leased cars, message
therapists and aircraft sales.
In
addition the bill raises capital gains taxes by almost $21 million.
The
sales tax holiday that Iowans enjoy in early August is repealed.
The
insurance premium tax that was enacted to make Iowa’s vital
insurance industry competitive with our neighbors is repealed.
Rep.
Fallon has invited all state representatives to co-sponsor the bill
with him. He targets the $368 million to education.
Ways
& Means Update
Bills
introduced and passed committee this week:
No bills passed committee
this week.
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