Governor, House GOP agree on commercial tax cut plan

DES MOINES, Iowa (AP) ? A bill that would reduce commercial property taxes, limit the growth of local government and slow the projected increase in the taxable value of residential and agricultural properties was approved by the House Ways and Means Committee on Wednesday evening.

The measure, a compromise between Republican Gov. Terry Branstad and the GOP-controlled House, was approved on a 15-10 party-line vote, with Republicans in favor and Democrats opposed. It would lower commercial property taxes by 40 percent over eight years and provide $240 million to offset cuts to local government budgets.

It also would limit taxable valuation increases for residential and agricultural properties, tie the growth of local government spending to the rate of inflation and increase the state's share of K-12 spending, which is aimed at reducing property taxes across the board. The bill now moves to full House.

But Democrats, who hold a majority in the Senate, said the plan doesn't address their concerns. They've pushed for a $200 million tax cut aimed at small businesses.

"It seems like it's the same old plan," said Senate Ways and Means Committee Chairman Joe Bolkcom, an Iowa City Democrat.

Bolkcom said the agreement would result in a residential property tax increase and send millions of dollars in tax cuts to out-of-state corporations. It also doesn't address concerns from local governments, Bolkcom said, who believes the cuts will threaten basic city services.

Des Moines Mayor Frank Cownie said legislators must ensure cities get enough tax revenue to provide services that are essential to their ability to grow.

Cownie and other city leaders were at the Capitol on Wednesday to highlight a new study from Iowa State University economist David Swenson. The study shows that the state's 10 largest cities account for 29 percent of the population, but generate 36 percent of jobs and 39 percent of the gross domestic product, a measure of economic activity.

"This analysis further solidifies our role as the economic engines of Iowa's economy and highlights the importance of the services provided by our cities," Cownie said.

House Ways and Means Committee Chairman Tom Sands, a Wapello Republican, said Wednesday that Democrats should like a part of the plan that implements property tax cuts for small businesses over five years instead of eight.

"We've heard their concerns about doing more for small businesses and that's why we have the accelerated small business portion in there," Sands said.

He also said the bill would protect residential and agricultural property taxpayers and provide relief for businesses. That, he said, is a recipe for economic growth, and the best way to limit projected tax increases.

But Rep. Dave Jacoby of Coralville, the top Democrat on the House Ways and Means Committee, said the plan shows a distrust of local governments and will hinder economic growth.

"I think this is a job-killing bill, because it ties local governments' hands," Jacoby said.

Bolkcom said Wednesday he still wants Branstad to agree to an increase in a working-class tax credit that the governor vetoed twice last year before discussions can start to find consensus on tax cuts for businesses.

Bolkcom's committee approved a $25 million increase in the earned income tax credit on a unanimous vote Wednesday, and he expects that to be on the Senate floor next week.