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Deduct or Delete: Sen. Joe Bolkcom (D-Iowa City) and Rep. Tom Sands (R-Columbus Junction)

posted on April 3, 2009

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Borg: Deduct or delete. Iowa legislative republicans passionately fighting democrat's plans for eliminating federal deductibility from Iowa's tax structure. We're questioning legislative tax writing committee leaders, Iowa City Democrat Joe Bolkcom and Columbus Junction Republican Tom Sands on this edition of Iowa Press.

Funding for Iowa Press was provided by Friends, the Iowa Public Television Foundation. The Iowa Bankers Association ... for personal, business and commercial needs Iowa banks help Iowans reach their financial goals. And by the Associated General Contractors of Iowa ... the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. By Iowa's Private Colleges and Universities ... enrolling 25% of the total Iowa higher education enrollment and conferring 44% of the baccalaureate and 40% of the graduate degrees in the state. More information is available at The Iowa Hospital Association ... supporting the missions and visions of Iowa's 117 community hospitals. The Iowa Hospital Association ... we care about Iowa's health.

On statewide Iowa Public Television, this is the Friday, April 3rd edition of Iowa Press. Here is Dean Borg.

Borg: Currently Iowa taxpayers are deducting their federal income tax payments from their state tax obligations. Iowa is one of three states allowing federal deductibility -- Alabama and Louisiana the others. Democrats controlling Iowa's legislature want to change that. As currently proposed it would lower state taxes for moderate income taxpayers and raise state taxes for some higher income Iowans. Democrats argue that eliminating federal deductibility will more accurately portray Iowa's tax structure. Republicans say it will hurt businesses creating jobs. Earlier this week the statehouse public hearing became so raucous on that subject that some opposing the change were ejected from the house chamber. We're receiving perspective today from two members of the legislature's tax writing committees, Iowa City Democrat Joe Bolkcom chairs the senate's ways and means committee and Columbus Junction Representative Tom Sands is the ranking republican on the counterpart committee in the house. Gentlemen, welcome to Iowa Press. Big news weekend.

Borg: We'll be talking about all that's in the news. And across the Iowa Press table Associated Press Senior Political Writer Mike Glover and Radio Iowa News Director Kay Henderson.

Henderson: Gentlemen, the big news in the political world is that the Iowa Supreme Court has ruled that same-sex couples may marry in Iowa. Senator Bolkcom, what is the implication?

Bolkcom: I haven't seen the decision specifically because it just came out in the last few minutes but I couldn't be more proud to be an Iowan today, to see that the values of Iowans, the values of tolerance and acceptance have been portrayed in this decision and I think it's a great thing. I appreciate the court's view on this.

Henderson: Representative Sands?

Sands: I would have a differing opinion that I would disagree -- I'm disappointed actually in the ruling and can't believe from what I hear from my constituents that this is what a majority of Iowans believe that this state should do. So, I believe the legislature should step up to the plate and take hold of this and actually put it to the vote of the people and see what the people of Iowa really do say.

Henderson: Representative Sands, your leader in the Iowa House, republican leader Kraig Paulsen said you have two things to do, pass a budget and balance a budget and go home. He did not put this on the table. Are you suggesting he's wrong?

Sands: I am not suggesting he's wrong. I don't know if we can do anything in the closing week or month of this session. It's unclear how much time we have left. But if we do not act this session there is next January to start something.

Glover: Senator Bolkcom, your take on this -- is there a reason for the legislature to get involved in this or do you think the court has settled the issue?

Bolkcom: I hope that the court has settled the issue. I don't think that we should use the state's laws to discriminate against people. I think Iowans have long valued equality and in terms of equality of marriage I think that people that love each other, that happen to be gay ought to have the right to get married. It's discriminatory not to allow that to happen.

Glover: Representative Sands, let's walk through the mechanics of what you can do from this point forward. The only choice you have I would take it is to try to amend the constitution. That would require a resolution in this general assembly and a resolution in the next general assembly. By my count that means you couldn't get a vote until 2012. Am I wrong?

Sands: You are not wrong but there again the court upholds the laws that we set as the legislative body and I think it's our responsibility to legislate laws that reflect the people of this state and from what I'm hearing from my constituents this is something they want so I believe that it's a road that we should start down now, start that process and we could still do that next year because we're in the same general assembly and not slow the process down any and put it to the hands of the people of Iowa and if I'm wrong them the people speak.

Henderson: Senator Bolkcom, this issue was on the ballot in the state of California and Californians voted to ban gay marriage. Why do you think Iowans wouldn't vote in the same manner?

Bolkcom: I think Iowans are tolerant people that respect individual rights and I don't think that they are of a mind to change our constitution to discriminate against people. I have constituents in my community that have long been in relationships, committed relationships and the law currently discriminates against them and I think that Iowans would be against it and changing our constitution.

Glover: I would suggest your constituents in Iowa City might be somewhat different than your constituents in Columbus Junction. But if we look at this whole issue, at what point does what's happening in this legislature set republicans up for the next election? This legislature is overhauling the state tax code to give middle income people a tax break and whack rich people. Now we've got gay marriage injected into the issue. At what point does what's happening in state government fire up the republican base?

Sands: I think we saw Tuesday night that the base is already starting to get fired up and this will just fire it up more because I don't believe that this is the change that everyone was talking about last election cycle as what they wanted because none of this, very little of this was actually campaign material. So, I believe the base is fired and a lot of this stuff when it comes to taxes or even gay marriage isn't just a partisan issue, it's a rural Iowa issue for sure and value of Iowa issue.

Glover: Senator Bolkcom, same question to you. At what point does what's happening in the legislature begin to backfire on democrats who now have, for the first time in 42 years, every branch of state government?

Bolkcom: Well, I think we're going to be pleased to run on an agenda of cutting taxes for middle class Iowans and providing healthcare to every youngster in our state and balancing the budget without raising taxes. We think we have a very strong record and we continue to move a progressive agenda here in our state. I think Iowans expect us to work on the problems that face our state and they are healthcare and the area of tax fairness and balancing our budget without raising taxes. I think we'd be happy to go to the polls with those issues.

Henderson: Gentlemen, let's talk details. Senator Bolkcom, do you have a deal? If so, what is it?

Bolkcom: Well, we have right now a really unfair tax system that it places an undue burden on middle class families and our reform proposal basically provides for a middle class tax cut to more than two-thirds of Iowans, Iowa middle class families. We think it's a very strong proposal, it's a fair proposal that really addresses this unfairness in the system by putting more money in people's pockets.

Henderson: But do you have a deal?

Bolkcom: We've been working over the last week with Representative Shomshor who is the chair of the house ways and means committee, he's also a CPA. He and I worked very closely this week with the Governor's Office on frankly improving our initial proposal. We've gotten a lot of feedback this week, the public hearing was part of that on Tuesday, members have got a lot of mail and we have listened to some of the concerns that have been brought forward and we are going to have an improved proposal next week to actually provide a middle class tax cut to even more Iowans.

Henderson: Representative Sands, do you think they have a deal?

Sands: Well, the only table I've been invited to so far is the table I'm sitting at so I don't think that there's been a deal that reached that yet or we would be more attuned of a debate possibly happening on Monday and what we've been told is there won't be any debate on this issue until Tuesday. And I disagree that the proposal that they have offered so far, because that's really all we've seen is the bill that has been voted out of committee, is a middle class tax cut because when you start looking at numbers there are people that their taxes will go higher in each income tax bracket from the bottom to the top. In fact, several people earning less than $20,000 a year will see a tax increase and only 48% to 49% of Iowans actually see a tax decrease.

Glover: Senator Bolkcom, this was going to happen on Thursday, this was going to happen on Friday, this was going to happen on Monday and now it's going to happen on Tuesday. There are those who say it's falling apart, it's unraveling. How do you respond to that? Is this going to happen?

Bolkcom: We've spent this last week taking more input on the proposal and I think as part of this listening process we've heard a few new ideas that we're going to incorporate in this proposal to make it even better. So, the process can take longer than one might think. We were criticized earlier in the week for moving too fast, we've slowed this down, sought more input, taken that input and I think we have a better proposal as a result.

Glover: One of the ideas you heard this week was throwing it in a river with a chain around your legs.

Bolkcom: I didn't see that story, Mike.

Glover: Is this going to happen? Republicans, I understand, oppose it -- it's a partisan issue -- democrats favor it, republicans oppose it. Democrats won the last election. Can you stop it?

Sands: We're going to do everything we can to stop it and to tell you the truth not all democrats support it and especially once you get outside the legislature there are several democrats that are conservative that are against this because they see it for what it is and we've slowed it down so far so we're going to continue to fight it on the merits of what it is.

Borg: Senator Bolkcom, a few minutes ago you said more money, it'll mean more money in people's pockets. Representative Sands didn't seem to think so. How are you going to assure people and those who are rural democrats who probably are the ones that are going to be the most difficult to bring along with you to pass this -- how do you assure them that in the long run it's not an overall tax increase?

Bolkcom: Well, our proposal tries to basically address people making less than $125,000 a year. On average our proposal provides a tax cut for those people. People beyond $125,000 a year of adjusted gross income on average will pay more. We have a philosophical difference between the parties here. Our party believes that working people have been unduly burdened with this tax code. Over the last number of years both at the national and state level we have passed regressive taxes that have disproportionately fallen on working people. We think that people with more means ought to pay more and that is a substantial difference between the republicans and the democrats. The republicans have stood more frequently with more wealthy Iowans and I think that's also what this debate is about, who do you stand with?

Borg: Representative Sands, it's about equality?

Sands: It's about equality for all Iowans. One of the things this bill does is actually lets government try to pick winners and losers in the tax system. We keep hearing about averages, about being at an income level where it favors the lower income levels or the middle class and it puts the burden on the upper end. The trouble is that's not completely true just because if you look at the numbers that the Department of Revenue has released there are people in each tax bracket that will have to pick up an additional burden just so some other people with different tax situations within those same tax brackets have a less burden. I don't say that that's fair or equal and what republicans stand is not with the wealthy, we stand with all Iowans and taxpayers.

Henderson: Do you agree, though, as Senator Bolkcom asserts that the tax burden has been shifted away from wealthy Iowans and toward lower and middle income Iowans?

Sands: I don't agree that it's been shifted down at all and if you just look at the tax rate I think you can make that argument. The trouble is there is a lot more into paying taxes than just the tax rate because if you look at all the revenues that individual income tax brings into the state of Iowa 20% of that total is paid by the top two percent of taxpayers in this state.

Glover: It's called a progressive income tax, Representative Sands, that's the way it's supposed to work and over the past few years the sales tax, which is a regressive tax arguably, has increased from 4% to 7% and the last income tax change was a 10% across the board cut during Terry Branstad's administration. Hasn't, in fact, Kay's question been what's happened?

Sands: With the sales tax it has put additional burden on different folks but at the same time I want to remind you that people in every income tax bracket buys services so they all pay sales tax and the people at the upper end, a lot of them, are small businesses, they're S-Corps, they're LLCs, they provide jobs that actually provide wealth for middle class Iowans as well. So, I don't buy that that is a bad thing.

Glover: Senator Bolkcom, I'll key it up here and let you slam it out of the park. If I'm buying my Hummer I'm going to pay a sales tax on my Hummer but if I'm buying my kid a new shirt I'm probably going to pay a sales tax on that which may be a little bit bigger part of my income. Make your case.

Bolkcom: Our current tax system is unfair when we look at how we pay for state and local services. Somebody making $50,000 a year or $40,000 a year pays about 10% of their income in those taxes. Somebody making more than $200,000 or $150,000 pays six or seven percent. That is unfair. We have piled on working people in this state through the use of this tax code. Why should the bank president pay less as a percentage of taxes than the teller that works at the bank? Currently the teller that works at the bank has a greater burden than the bank president. That's simply unfair. This is a very modest proposal to begin to provide some relief to the middle class taxpayer who really have built this state and are the backbone of this state.

Henderson: Should Iowa's sales tax be reduced?

Bolkcom: We need to continue to work for more progressive taxation. I would also add that we've seen the explosion of gaming in our state which is extremely regressive tax. So, there are a lot of examples of this.

Glover: But turn that around, that's a voluntary tax. No one forces me to go to a casino.

Bolkcom: There's no question it's a voluntary tax and it raises a few hundred million dollars but the burden falls on working people and so this very modest income proposal to reform our income tax, make it simpler, make it more competitive frankly for good job creation is something I'm excited to be working on and something I hope we can accomplish next week.

Borg: Senator Bolkcom, do you think it's going to pass?

Bolkcom: I do think it's going to pass.

Borg: How should I then be planning for that in my tax withholding? I'm already nearly four months into the tax withholding year so I've been under withholding or over withholding.

Bolkcom: I'm not sure I can give you advice on how you should make a decision -- every taxpayer is different. We have a very complicated income tax code. 60% of Iowans have to pay somebody to do their taxes it's so complicated. This proposal is going to simplify our system and make it more fair. I don't have advice for you today, Dean, on what you should do. Let's recognize that the current system we have that is frozen in place now is not fair and we're going to make a modest improvement to make it a little bit more fair. Our work won't be done, there's more to do to help working families relieve this burden.

Henderson: Representative Sands, the Iowa Chamber Alliance, which represents the 16 largest chambers of commerce in Iowa, argue that federal deductibility, that ability Iowans have to deduct their federal tax bill from their income before they calculate their state taxes hurts Iowa competitively. The Iowa Taxpayers Association makes that same argument. Why do you disagree with that argument?

Sands: Well, if you go on the economic development Web site you'll find that they actually market federal deductibility as a tool to bring people into Iowa and sometimes it can be just used as an excuse that it slows down businesses looking at our state but if you talk to most businesses they will tell you they are smart enough to figure out Iowa's tax system. They look at that very in depth and they understand federal deductibility so I believe that's just an excuse that they don't come in here. Some of those groups that you mentioned, though, do not support this bill because they see it for what it is.

Henderson: Senator Bolkcom, why should Iowans pay a tax on a tax which is the argument that opponents of this plan are advancing?

Bolkcom: Well, I think that's really a nice bumper sticker or slogan but I don't think it has much merit. We pay taxes on a number of taxes, Social Security taxes, the local options surtax, federal fees that are on our phone bills, there are plenty of examples. 40 other states, more than 40 other states don't have this outdated provision in their code and they seem to do just fine.

Glover: Representative Sands, I'd like to get back to some of the basics of this argument. At what point are people making decisions on this based on rational analysis of tax code? And at what point are they letting their emotions get carried away? At that public hearing this week I was looking at most of the people who were shouting and throwing things and legislators and thinking, they probably pay less taxes under this. At what point is emotion driving this?

Sands: I think what you've seen this past Tuesday night is the reaction of the people of this country that are just plain fed up.

Glover: Are they fed up with this proposal or just fed up with government in general?

Sands: They're fed up with government in general and they see this proposal as just one more that they can't believe because it was originally released as a middle class tax cut and then we find out it's only a middle class tax cut for some folks and not other folks. So, I think this one was just adding onto it that they're fed up with government, they're fed up with overspending, they're fed up with bailouts, they're fed up with a lot of things and I think we've seen the emotion of Iowans and probably one that reflects most Americans that they are just fed up.

Glover: Senator Bolkcom, how do you counteract that? How do you go to someone and say it's in your best interest, you'll pay less, financially you'll be better off when they're just angry?

Bolkcom: Well, we have lowered the rates for everybody in this proposal. This archaic, outdated provision in our code provides 80% of the benefits to the top 20% of income earners. Most of the people at that public hearing on Tuesday evening would benefit from this proposal. I think we have more work to do to get our message out there, to educate Iowans about the benefits of this proposal and how unfair our current system is.

Glover: But if Representative Sands is right and people are just angry how do you deal with that rationally?

Bolkcom: Well, I think there's a lot to be concerned about. The meltdown of the financial markets, the subprime housing market and the meltdown of it, people are unhappy that Wall Street and the financial services industry have been so irresponsible in putting this national recession, this worldwide recession on our laps and I think people are upset about that.

Glover: And what danger do you face in this? Democrats are the party in power in the legislature, in the Governor's Office, history would teach you when people are angry they take it out on those people who are in office. Don't you face some risks here?

Bolkcom: I think we're going to go -- we don't have elections until next year. But, again, we're going to run on providing a middle class tax cut, we're going to run on improving our schools, we're going to run on providing healthcare for every uninsured youngster in this state, we're going to run on putting together a first class flood recovery effort, disaster recovery effort and we're going to do it while balancing the budget and not raising taxes. We think we have a strong agenda to run on.

Glover: Put your political hat on, Representative Sands, isn't this an opportunity for you? Wouldn't republicans benefit historically by an angry electorate out there that tosses those guys out?

Sands: I agree and I believe that with a lot of stuff that is coming down this session that this puts us in the driver's seat and are very capable of taking over the majority of the house in this next election cycle and we will take this message out that we're fighting for the taxpayers of Iowa.

Borg: I want to go back to an earlier question because I've had some time to think -- I don't want you to figure my taxes but why not make the effective date then January 1st which is the tax year rather than the fiscal year?

Bolkcom: Well, I think we just made a decision about when to start. I don't think most people are going to be impacted by that. We thought the sooner we could get money into people's hands that need it the better, we're in a recession in our state and providing a middle class tax cut and putting money in people's hands sooner is the choice we made and I think it's the right one.

Henderson: Senator Bolkcom, the governor made a decision and he said now is not the time to raise the gas tax and that's been taken off the table. Do you agree with him that the state should borrow money to finance road and bridge construction and repair projects?

Bolkcom: I have some concerns about borrowing money for road and bridge projects. They would have to be projects that if we did borrow money those bonds would have to be for a very short period of time. Bonding should be used generally on things that last a long time, 40 or 50 or 60 years. Roads have about a 20 year lifespan. I don't want to be paying for a road in 20 years that we bonded for today. So, I think maybe there's some room for some bonding perhaps for a short-term period to get this economy going. But in general I think we should be cautious about that.

Henderson: Representative Sands, you come from Columbus Junction, an area which saw a lot of damage to roads and bridges. Do you agree with the governor that the state should borrow money to finance repair of roads and bridges?

Sands: No, certainly not. This is not the time that Iowa needs to be borrowing money. In fact, the state does not need to be borrowing money period and if they go down that road I think that's just one more tool that that gives us in our toolbox.

Henderson: So, then how should that be financed? Should the gas tax be raised?

Sands: I think there are those out there that want to raise the gas tax.

Henderson: Are you one of them?

Sands: I am not and there's two reasons. Number one, what I've seen so far in my seven years up here they haven't needed me to raise any taxes before or do any additional spending although the gas tax probably is one that you can make a good argument that if it's constitutionally protected and it goes to improve the roads of Iowa that could happen but you also need to approach the DOT and see if they can't do a more efficient way of running that department where more roads are actually ...

Glover: Mr. Sands, we've only got about 30 seconds left and it wouldn't be an official Iowa Press if we didn't talk a little bit about serious politics. The governor is the person in this state who sets the political direction of this state. Governor Culver is running again for the democrats. Who have you got to run against him?

Sands: I can tell you it's not going to be me. I'm running for re-election in the Iowa House.

Glover: But you can't change anything until you replace him.

Sands: That's exactly right, he is the CEO of our state and there are different names coming forward. I'm hearing some and it seems to be people talking about other names. I'm curious to see who we do have come forward.

Borg: Since you're off the hook on not running for governor I'm out of time and you're off the hook. Thanks for being with us today.

Borg: On our next edition of Iowa Press we're talking with the new state chairman of Iowa's Republican Party discussing Matt Strawn's plans for reviving the party and regaining statehouse majorities. You'll see our conversation with Matt Strawn at the usual Iowa Press airtimes, 7:30 Friday night and 11:30 Sunday morning. I'm Dean Borg. Thanks for joining us today.

Funding for Iowa Press was provided by Friends, the Iowa Public Television Foundation. The Iowa Bankers Association ... for personal, business and commercial needs Iowa banks help Iowans reach their financial goals. And by the Associated General Contractors of Iowa ... the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. By Iowa's Private Colleges and Universities ... enrolling 25% of the total Iowa higher education enrollment and conferring 44% of the baccalaureate and 40% of the graduate degrees in the state. More information is available at The Iowa Hospital Association ... supporting the missions and visions of Iowa's 117 community hospitals. The Iowa Hospital Association ... we care about Iowa's health.

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