Governor
Releases Budget Filled With
Gimmicks
And Few Cuts
Last
week, the Governor released his revised FY 2003 budget
recommendations. The
revised budget is filled with gimmicks and contains very few
actual cuts. Not
surprisingly, the Governor has once again failed to make the tough
choices and will again look to the Legislature to bail him out.
In
his press release announcing the budget, the Governor claimed that
his budget protects Iowa’s fiscal integrity.
He claims that forty-four other states are experiencing
declining revenue and all other states are raising taxes to
balance their budgets. This
is not true. As an example, the Governor of Illinois has proposed a budget
that does not raise taxes. The
Governor also claims that his budget doesn’t raise taxes, but
instead eliminates the Iowa-Illinois tax reciprocity agreement and
proposes several property tax increases.
The
Governor’s release goes on to state that Iowa is “a leader in
fiscal management.” The
release also cites ratings that Iowa received from Governing
magazine and the Standard and Poor’s credit rating agency.
Unfortunately, the Governor failed to mention that his
policies were called “fiscally reckless” and that he received
an “F” for fiscal management in the Wall Street Journal last
year.
The
Governor claims that he based his revised FY 03 budget on the
Legislature’s solution to the FY 02 budget deficit.
Since Governor Vilsack did not provide a workable solution
to the FY 02 budget deficit, it begs the question of how else
would he have based his revised FY 03 budget.
According to the Governor’s press release, the
Legislature’s FY 02 solution was 41 percent transfers from other
funds, 37 percent from the EEF and 22 percent in budget cuts.
He claims his revised budget is 48 percent shifts from
other funds, 32 percent from the EEF and 20 percent in cuts.
Using
those figures, the Governor’s revised FY 03 budget would have to
show $58.2 million in cuts. It
appears that $55.8 million of those cuts are in the Department of
Public Safety. However,
the Governor covers that cut to DPS by shifting the funding into
the Road Use Tax Fund. With normal math this would be not be a cut but rather a
shift. With
“Vilsack math” it is a cut.
Furthermore, the Governor is well aware that he does not
have support from Republicans or Democrats to accomplish the RUTF
shift. Therefore,
this cannot be described as a genuine attempt to craft a budget
but more than likely is just an opening offer in budget
negotiations.
House
Ways and Means Committee Approves
Refund
For LISCO Customers
On
Monday, March 11, the Ways and Means Committee unanimously
approved HF 2006, which addresses the taxation of Internet
services.
HF
2006 (now HF 2585 by the Committee on Ways and Means) provides
that if a retailer failed to collect any state sales and use
taxes, and any local sales and services taxes from purchasers of
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the
retailer's access to online computer services because of erroneous
written advice from the Iowa Department of Revenue and Finance and
had these taxes abated, then the taxes shall not be collected from
the purchaser.
Additionally,
if the customer had paid these taxes, along with any interest or
penalty, the taxes, interest, and the penalties the customer had
paid will be refunded if the customer files a claim for the refund.
The bill takes effect upon enactment, and applies to taxes that were
due from charges paid for access to online computer services on or
after January 1, 1996. HF 2585 will be eligible for floor debate on March 16.
Jump
Start to Venture Capital Approved
HSB
707 (now HF 2586), which allows a tax credit for equity investments
in venture capital funds (such as the Iowa Fund of Funds, as created
in HF 2078), was approved by the Ways and Means Committee on Monday,
March 11.
The
tax credit can be used against personal, corporate, franchise,
insurance premium, and moneys and credits taxes.
HF 2586 provides that the amount of the tax credit shall not
exceed six percent of the taxpayer’s equity investment in venture
capital funds. Similar
to the Angel Investment bill (HF 2271), the taxpayer cannot claim
the tax credit prior to the third tax year following the tax year in
which the investment is made.
Additionally,
any tax credit in excess of the taxpayer’s liability may be
credited to the tax liability for the following five years or until
depleted, whichever is earlier.
HF 2586 also provides that a tax credit cannot be carried
back to tax years prior to the tax year in which the taxpayer claims
the credit.
HF
2586 has a cap of $5 million, and applies retroactively to January
1, 2002.
Ways
& Means Update
Bills Passed In The Ways & Means
Committee
This Week:
HF 2480
An act relating to an increase in the resident hunting
license fee and establishing a pheasant and quail restoration
program and making an appropriation.
HSB
711
An act relating to property tax relief and school
infrastructure purposes by distributing certain state sales tax
revenues to school districts for property tax relief or school
infrastructure purposes.
Bills
Assigned in the Ways & Means
Committee
this week:
HSB
707
An act allowing a tax credit for equity investments in
venture capital funds.
HF
2006
An act relating to the abatement of state sales and use taxes
and local sales and service taxes of purchasers of certain access to
on-line computer services and providing refunds
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Week
in Review Archives
