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News Analysis: March 26, 2009

posted on March 27, 2009 at 1:08 PM

Radio Iowa News Director Kay Henderson and Paul Yeager talk about new tax structure, extension of jobless benefits and the politics of this week's (March 26, 2009) White House health care forum.

Paul Yeager: We turn to Kay Henderson for a status report on the last weeks of the legislative session.  Kay, there's always things going on and today it seems like tax revamp.  We're looking at changing the tax policy.  What is this about?

Kay Henderson: Democrats began hinting in February that they were interested in getting rid of a tax break that every Iowan claims if they file income taxes.  It is the ability Iowans have to deduct their federal tax bill from their income before they calculate their state income tax liability. 

The folks up at the statehouse call it federal deductibility.  I'll just call it a tax break.  The bill or the plan that democrats in the legislature rolled out today would get rid of that tax break but they argue more importantly their plan would cut taxes for about two-thirds of Iowans or at least maintain the same level of taxation that Iowans are currently under if you earn $125,000 annually or less. 

They say that maybe a third of Iowans will see, in their words, a slight increase in their taxes.  If you're a singleton in Iowa, sorry, but if you have children they are also going to increase the credits that you have the ability to claim for having children.

Paul Yeager: Now, is this something that has a good legitimate chance of becoming law?

Kay Henderson: Yes.

Paul Yeager: And is this something that is going to be viewed as a we didn't really raise taxes but yet it can be turned back as a campaign issue in two years?

Kay Henderson: Actually Senator Mike Gronstal who is the Majority Leader in the Iowa Senate was asked that question today and he said we're interested in putting money back into the pockets of, his words, hard-working, middle-class Iowans and it will require some Iowans to pay more.  So, they are ready to make that argument. 

The question here is will an organization that largely functions as the defender of this particular tax break, we all know we're talking about Iowans for Tax Relief, they are going to launch an all-out assault on this just like they did in the 1980s when former Governor Terry Branstad, a republican, proposed getting rid of this. 

Now, some business groups and including the Iowa Chamber Alliance which represents the 16 largest chambers of commerce in Iowa support this because if you look at Iowa's top income tax rate it's just a little bit shy of 9%, again, because of this tax break. 

But if you get rid of that tax break it lowers that top tax rate to just under 7% and makes it more akin to surrounding states such as Nebraska, it would be almost identical to the top tax rate in the state of Nebraska.  They say that when executives in other states look at Iowa's top tax rate they shy away because they see that 9%.

Paul Yeager: So, that puts us more competitive in Council Bluffs and Sioux City and that's the big argument.  I'm sure there's also an argument on the other side of the state to Illinois in the Quad Cities or something like that.  But taxes is not the only thing but we're also looking at the possible expansion of jobless benefits in the state, we've seen people going out of work.  What is exactly going to help those who are out of work?

Kay Henderson: Well, this was an initiative that started at the federal level.  The state of Iowa will be receiving $71 million from the federal government to finance an expansion of unemployment benefits. 

First, if you are currently out of work and receiving unemployment benefits and in a training program to get new skills to get a new job it would extend the time by 26 weeks that you can receive unemployment benefits which is a huge amount of time for people who may be attending a community college or some job training program. 

The other part of that legislation deals with people who file for unemployment today.  The way the law acts is that you have to wait until the next business quarter to start receiving unemployment benefits and so this would speed up the process so that you can start receiving unemployment benefits in the quarter in which you were displaced from the job pool as it were.

Paul Yeager: And in the final thirty seconds here, on Monday there was a healthcare forum involving the White House and also the Governor's Office.  This wasn't all join hands and let's sing Kumbaya.

Kay Henderson: The interesting thing to me about this event was that it showcased that the far left democratic part of the party really wants a single pair system while other parts of the Democratic Party are willing to accept a more middle ground which maintains private insurance rates and steps up a little bit more government coverage. 

So, it's turning out to be a debate among democrats rather than a debate between democrats and republicans.

Paul Yeager: We'll have to see how that one plays out.  Kay Henderson of Radio Iowa, I'm sure we'll catch it up on the blog there on your stories that you'll follow there.  Thank you so much for coming in tonight.

Tags: government Iowa news

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