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Iowa Press #2727 - SEN. JOANN JOHNSON AND REP. JAMIE VAN FOSSEN
March 5, 2000

Borg: WITH A MONTH AND A HALF REMAINING IN THE CURRENT SESSION OF THE 78TH IOWA GENERAL ASSEMBLY, TAX MATTERS COULD BE A MAJOR ISSUE. WE'LL GET PERSPECTIVES FROM SENATOR JOANN JOHNSON AND REPRESENTATIVE JAMIE VAN FOSSEN, THE CHAIRS OF THE LEGISLATURE'S WAYS AND MEANS COMMITTEE, ON THIS EDITION OF IOWA PRESS.

FUNDING FOR IOWA PRESS WAS PROVIDED BY FRIENDS OF IOWA PUBLIC TELEVISION. AND BY THE IOWA BANKERS ASSOCIATION... FOR PERSONAL,BUSINESS, AND COMMERCIAL NEEDS, IOWA BANKS HELP IOWAN SREACH 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.

THIS IS THE SUNDAY, MARCH 5 EDITION OF IOWA PRESS. HERE IS DEAN BORG.

Borg: THE LEGISLATIVE SESSION OF 2000 OPENED WITH REDUCTIONS IN STATE SPENDING IN THE CURRENT BUDGET YEAR TO ACCOMMODATE AN ANTICIPATED REVENUE SHORTFALL OF UP TO $35 MILLION. WHILE THAT REDUCTION OF THE CURRENT BUDGET REPRESENTS LESS THAN 1 PERCENT OF THE TOTAL BUDGET, THE SHORTFALL FORCED ARE TOOLING OF PROPOSALS FOR FUTURE SPENDING THAT WERE TO BE CONSIDERED DURING THE CURRENT LEGISLATIVE SESSION. AND WHAT'S NOT KNOWN IS WHETHER THE STATE'S REVENUE DECLINE WILL ALSO AFFECT PLANS FOR ELECTION YEAR CUTS IN PROPERTY AND INCOME TAX RATES. OTHER TAX ITEMS ARE ALSO BEING CONSIDERED, INCLUDING CHANGES IN DISTRIBUTING REVENUE FROM LOCAL OPTION SALES TAXES, GOVERNOR VILSACK'S PROPOSAL FORVOTER APPROVAL OF TAX HIKES IN THE FUTURE, AND THE ANNUAL ARGUMENT OVER WHETHER IOWANS SHOULD BE ALLOWED TO DEDUCT FROM THEIR STATE TAX WHAT THEY'VE PAID IN FEDERAL INCOME TAX. JOINING US TO SORT THROUGH THOSE ISSUES AND OTHERS ARE SENATOR JOANN JOHNSON, WHO CHAIRS THE IOWA SENATE'S WAYS AND MEANS COMMITTEE, AND REPRESENTATIVE JAMIE VANFOSSEN, THE CHAIR OF THE WAYS AND MEANS COMMITTEE IN THE IOWA HOUSE. I SAW BOTH OF YOU LAUGHING AS I WENT DOWN THE LIST OF THINGS TO BE CONSIDERED. WE'LL QUESTION YOU ABOUT THOSE. IOWA STATEHOUSE REPORTERS DAVID YEPSEN OF THE DES MOINES REGISTER AND JENEANE BECK OF KUNI PUBLIC RADIO.

Beck: REPRESENTATIVE VAN FOSSEN, RECENTLY THE REPUBLICANS RELEASED THEIR SPENDING PLAN FOR THIS LEGISLATIVE SESSION, AND IT LOOKS LIKE THEY SPENT JUST UP TO THE SPENDING LIMITATION, ABOUT $10 MILLION LESS THAN THAT. DOESN'T SEEM LIKE THERE'S MUCH ROOM FOR TAX CUTS THIS YEAR. WILL THERE BE ANY?

Van Fossen: WELL, I-- MY AGENDA FOR THIS SESSION IS VERY SIMPLE. FOR THE SIXTH YEAR IN A ROW, I WANT TO CUT TAXES. AND WE WILL DO THAT IN THE IOWA HOUSE, AND THE LEGISLATURE HOPEFULLY WILL PASS THE TAX CUTS. THAT'S OUR PLAN. IT LEAVES LESS ROOM FOR TAX CUTS, BUT THERE'S ALSO OPPORTUNITIES OUT THERE.WE ARE IN A TIGHT BUDGET SITUATION, BUT I SEE OPPORTUNITIES TO DO SOME REAL CUTS IN GOVERNMENT, SHRINKING THE SIZE OF GOVERNMENT, THINGS THAT DAVE HAS TALKED ABOUT OVER THE YEARS. WE CAN DO THAT WITH THIS BUDGET, AND I THINK THAT THE BUDGET THAT HAS COME OUT IS A GOOD BUDGET THAT WE'VE COME UP WITH. SO, YES, THERE WILL BE TAX CUTS.

Beck: ANY SPECIFIC PROPOSALS, SENATOR JOHNSON?

Johnson: I THINK WE'RE TAKING A LOOK AT SEVERAL THINGS. WE'RE LOOKING AT A LOT OF POLICY THINGS, IN ADDITION TO ANY POSSIBLE REDUCTION. REVENUES WERE BETTER IN THE MONTH OF FEBRUARY, WHICH IS VERY ENCOURAGING. I THINK THERE'S A REAL DESIRE TO MAKE SURE WE MAINTAIN AN HONEST BUDGET. SORE DUCTIONS WON'T BE AS GREAT AS THEY HAVE BEEN IN THE LAST YEARS, BUT THAT'S WHAT WE'VE BEEN DOING IS RETURNING PEOPLE'S MONEY, LEAVING IT IN THEIR POCKETS AND TRYING TO CUT THE SPENDING. SO THAT'S WHERE WE WILL BE FOCUSED ON.

Yepsen: SENATOR JOHNSON, WILL YOU BE ABLE TO GET TAX CUTS THAT THE GOVERNOR CAN SIGN? GOVERNOR VILSACK ALWAYS REMINDS PEOPLE THAT THE STATE, OVER THE LAST FEW YEARS, HAS CUT ABOUT $720 MILLION WORTH OF TAXES AND IMPLYING THAT IT MAY BE TIME TO SORT OF QUIT DOING THAT FOR A WHILE AND SPEND SOME MONEY ON OTHER THINGS. WILL YOU FORM ANY KIND OF TAX CUTS THIS SESSION THAT THE GOVERNOR CAN SIGN?

Johnson:WELL, I WOULD BACK UP JUST A MINUTE. THE TAX REDUCTION THAT WE HAVE DONE OVER THE LAST FOUR YEARS, YOU'RE CORRECT, A LITTLE OVER $700 MILLION, WHICH IS MONEY BACK IN THE POCKETS OF IOWANS. THE GOVERNOR EITHER VOTED FOR OR SIGNED ALMOST ALL OF THOSE TAX REDUCTION PACKAGES. SO THEY'VE BEEN BIPARTISAN AND WITH REPUBLICAN LEADERSHIP GETTING THAT DONE. I THINK THEY CAN COME UP WITH A LITTLE BIT OF ADDITIONAL REDUCTION THAT HE WILL SIGN. WE'RE TAKING ALOOK AT PERHAPS SOME PENSION EXEMPTION. WE'RE TAKING A LOOK AT SOME INCENTIVES. I'D LIKE TO TAKE A LOOK AT A TAX CREDIT FOR ASSISTIVE DEVICES FOR EMPLOYERS THAT HIRE THE DISABLED. I'D LIKE TO TAKE A LOOK AT A TAX CREDIT FOR THOSE THAT PURCHASE LONG-CARE HEALTH INSURANCE. SO, THERE ARE THINGS OUT THERE THAT I'M SURE WE CAN FIND AGREEMENT ON.

Yepsen: WE'LL GET TO SOME OF THOSE SPECIFICS IN A MINUTE. MR. VAN FOSSEN, I WANT TO ASK YOU ABOUT A BIGGER PICTURE QUESTION. YOU SAY, OKAY, SOME TAX CUTS THIS SESSION, MAYBE NOT A LOT. I GATHER I'M NOT SUPPOSED TO GO OUT AND SPEND A WHOLE BUNCH OF MONEY WITH MY TAX CUTS.

Van Fossen: NOT YET, AT LEAST.

Yepsen: WHERE ARE WE HEADED LONGER TERM? YOU'VE STUDIED THESE TAX POLICY QUESTIONS IN IOWA. WHAT'S ON THE HORIZON? WHERE DO WE NEED TO GO NEXT IN ADJUSTING OUR TAX SYSTEM?

Van Fossen: WELL, AS YOU LOOK AT THE TAXES AND REVENUES OVER THE YEARS, DAVID, REVENUES CONTINUE TO INCREASE. IT'S THE FLUCTUATION IN SPENDING THAT CAUSES US PROBLEMS AT THE STATEGOVERNMENT. BACK IN THE EARLY '90S WHEN WE WENT IN THE HOLE, IT WASN'T BECAUSE REVENUES WEREN'T INCREASING; IT'SBECAUSE WE SPENT TOO MUCH. WE'RE IN DANGER OF DOING THAT AGAIN; WITH LAST YEAR'S BUDGET, WE CROSSED THE LINE. OVERALL TAXES, THE TAX CUTS THAT JOANN MENTIONED, OVER HALF OF THAT HAS BEEN TO INCOME TAX CUTS, AND A LITTLE LESS THAN HALF TO PROPERTY TAX CUTS, AND THEN SOME VARIOUS OTHER SALES TAX CUTS THERE. WE'VE GOT A GOOD BALANCE RIGHT NOW, I THINK, IN GOVERNMENT WITH SALES TAX, INCOME TAX, PROPERTY TAX, BEING ABOUT A THIRD SPLIT ALL THE WAY THROUGH. TAXCUTS ARE IMPORTANT. I'M NOT GOING TO APOLOGIZE FOR ANY OFTHE TAX CUTS THAT WE'VE DONE. WE CAN CONTINUE TO DO IT. WE ALWAYS SHOULD BE CONSIDERATE ABOUT THE FAMILY BUDGET OVER THE GOVERNMENT BUDGET, AND IF WE DON'T SPEND MORE THAN WE TAKE IN, WE'LL BE IN GOOD SHAPE AND WE CAN CUT TAXES.

Yepsen: SENATOR JOHNSON, SAME QUESTION TO YOU. LOOKOUT IN THE LONG-TERM, WHAT DO WE NEED TO DO NEXT AND IN THE FUTURE TO MAKE IOWA'S TAX SYSTEM MODERN, MORE COMPETETIVE,IF YOU WILL, FAIRER? YOU KNOW WHAT THOSE ISSUES ARE.

Johnson: I'D LIKE TO DO MORE IN THE AREA OF SIMPLIFICATION. OVER THE YEARS WE'VE TRIED TO MAKE --WE'VE USED TAX CUTS AND CREDITS TO BECOME MORE COMPETETIVE, TO TRY TO LURE BUSINESS INTO THE STATE AND KEEP OUR BUSINESSES HERE. SO WE'VE USED CREDITS AND EXEMPTIONS TO DO A LOT OF OUR ECONOMIC DEVELOPMENT. WHEN YOU TAKE A LOOK AT ALL OF THE CREDITS AND EXEMPTIONS -- WE HAVE SIX PAGES OF CREDITS AND EXEMPTIONS, SO WE HAVE CREATED A VERY CONVOLUTED TAX RETURN AND THE WHOLE TAX -- MY DESIRE IS TO SOMEHOW SIMPLIFY OUR TAX SYSTEM. I DON'T KNOW IF WE NEED TO WAIT FOR THE FEDERAL GOVERNMENT TO GET TO A FLATTER TAX, BUT THAT WOULD CERTAINLY BE MY DESIRE.

Yepsen:ONE FOLLOW UP TO THAT. ARE THESE TAX CUTS WORKING? I MEAN YOU'VE CUT A LOT OF TAXES. AND YOU'RE RIGHT, BOTH REPUBLICANS AND DEMOCRATS TRY TO DO ECONOMIC DEVELOPMENT, AND YET IF YOU LOOK AT THE STATE, WAGE RATES ARE STILL BELOW THE NATIONAL AVERAGE. SENATOR, WHAT EVIDENCE DO YOU HAVE TO SUGGEST THAT ANY OF THESE TAX CUTS ARE ACTUALLY WORKING?

Johnson: THERE IS PLENTY OF EVIDENCE OUT THERE. WE ARE GROWING BUSINESSES. OUR POPULATION IS RELATIVELY FLAT RIGHT NOW. A LOT OF STATES ARE BASED ON THOSE SAME THINGS. WE HAVE A WORKER SHORTAGE, BUT WE'RE WORKING WITH SOME OF THESE TAX INCENTIVES TO CREATE GOOD PAYING JOBS.

Borg: REPRESENTATIVE VAN FOSSEN, ON THE FLIP SIDE OF THAT, LOOKING AT POSSIBLE FUTURE INCREASES IN TAXES, GOVERNOR VILSACK HAS A POPULIST IDEA THAT VOTERS SHOULD BE ALLOWED TOAPPROVE, IN THE FUTURE, ANY INCREASES IN TAXES OR NEW TAXES, SPECIFICALLY. IS THAT GOING TO GO ANYWHERE?

Van Fossen: OH, WE PASSED IT OUT OF THE HOUSE WAYS AND MEANS COMMITTEE A FEW WEEKS AGO. IT'S THE PEOPLE'S TAX REFERENDUM. IT PASSED OUT OF THE WAYS AND MEANS COMMITTEE, AND IT'S CURRENTLY ON THE FLOOR. THE MAJORITY LEADER IS GOING TO SCHEDULE DEBATE ON THAT BILL RESOLUTION. I THINK IT'S A GOOD IDEA. ANYTIME YOU CAN GIVE THE PEOPLE OR VOTER A VETO POWER OVER TAX INCREASES, ANYTHING YOU CAN DO TO SLOW THE GROWTH OF TAXES IS A GOOD IDEA.

Borg: IT'S MOVING INTO HOUSE SENATOR JOHNSON; WHAT ABOUT THE SENATE?

Johnson: THERE IS MORE INTEREST ON THE SENATE SIDE THAN, I WOULD SAY, PERHAPS, INITIALLY. SO ITHINK THERE WILL BE A GOOD SHOT AT HAVING IT DEBATED IN THE SENATE AS WELL.

Beck: BUT PAIRED WITH THAT THE GOVERNOR HAD ALSO HOPED TO GET RID OF SOMETHING CALLED FEDERAL DEDUCTIBILITY, WHICH ALLOWS IOWANS TO TAKE A CREDIT FOR WHAT THEY PAY IN FEDERAL TAXES ON THEIR STATE INCOME TAXES. WHAT'S THE HOPE OF THAT?

Johnson: NO, I DON'T HAVE A LOT OF PEOPLE BEATING MY DOOR DOWN SAYING THAT THEY WANT TO LOSE THEIR DEDUCTION. I'M NOT HEARING THAT FROM THE PUBLIC. I DON'T LOOK FOR IT TO GO ANYWHERE THISYEAR.

Van Fossen: THAT WAS ONLY PAIRED RECENTLY. DURING THE CONSTITUTIONAL AMENDMENT VOTE LAST YEAR AND WHEN THE GOVERNOR WAS RUNNING, I DON'T REMEMBER HIM TALKING ABOUT FEDERAL DEDUCTIBILITY OR TYING THE TWO ISSUES TOGETHER. IN FACT, THEY PUT OUT A RELEASE OF THEIR PRIORITIES FOR THE SESSION, AND THEY DID NOT HAVE THE TWO TIED TOGETHER. HE TALKED EXCLUSIVELY, OR THE RELEASE DID, ABOUT THE PEOPLE'S TAX REFERENDUM. WITH FEDERAL DEDUCTIBILITY, WHAT ARE YOUTRYING TO GAIN OUT OF THAT? THAT'S THE GENERAL QUESTION WHEN YOU ELIMINATE FEDERAL DEDUCTIBILITY. I SEE IT AS A GIMMICK TO LOWER THE RATES. IT'S NOT TRUE TAX REDUCTION; YOU'RE JUST PLOWING THOSE BACK INTO THE RATES.

Johnson: BUT THOSE MAKING MORE... COULD SEE THEIR RATES RISE.

Van Fossen: BUT OVERALL, IF YOU'RE LOOKING AT ECONOMIC DEVELOPMENT, THINGS LIKE THAT, I KIND OF WORRY ABOUT A COMPANY THAT CAN'T LOOK AT OUR RATES AND SAY WE'VE GOT FEDERAL DEDUCTIBILITY, TAKE THAT INTO ACCOUNT.

Beck: DO YOU THINK, THOUGH, THAT OUT-OF-STATE IOWANS THAT MIGHT WANT TO MOVE BACK, IF THEY LOOK UP THE STATE ON THE INTERNET AND SEE THAT OUR TAX RATE TECHNICALLY LOOKS HIGHER, DO YOU THINK THEY MAKE THE SAME ASSUMPTION THAT BUSINESSES DO, THAT WE DO HAVE FEDERAL DEDUCTIBILITY, OR ARE THEY NOT TAKING THAT INTO ACCOUNT?

Van Fossen: IF THEIR AN IOWAN, THEY KNOW THAT WE HAVE FEDERAL DEDUCTIBILITY. THIS IS EITHER THE LARGEST OR SECOND LARGEST DEDUCTION THAT FOLKS HAVE. I WORRY ABOUT THE SHIFTS THAT SENATOR JOHNSON JUST MENTIONED. ALSO, YOU HAVE TO CONSIDER FOLKS THAT DON'T HAVE A MORTGAGE, THAT MORTGAGE DEDUCTION; THIS IS THEIR LARGEST DEDUCTION. NEWLYWEDS JUST STARTING OUT RENTING; IT'S THEIR LARGEST DEDUCTION. THERE WILL BE SHIFTS ACROSS THE BOARD, AND ESPECIALLY ON THOSE MAKING OVER 75, IT'S AN INCREASE IN TAXES UNDER THE GOVERNOR'S PROPOSAL. WE ALL REMEMBER BACK IN 1986 WHEN THERE WAS THIS TRADE FORDEDUCTIONS, YOU KNOW, TAKING DEDUCTIONS OFF FOR LOWER RATES, AND IN '90 AND '93 OUR RATES WENT UP AGAIN. SO I DON'TWANT TO -- I'M CONCERNED THAT THAT WILL HAPPEN HERE TOO.

Yepsen: SENATOR JOHNSON, YOU MENTIONED THE SHIFT THAT REPUBLICANS THINK WILL OCCUR. WHY CAN'T WE HAVE OUR CAKE AND EAT IT TOO? I MEAN MOST PEOPLE UNDERSTAND THE GOVERNOR'S POINT THAT IF YOU ELIMINATED THIS DEDUCTION AND LOWERED THE RATE, WE WOULD HAVE A SIMPLER, FAIRER TAX SYSTEM. YOUR POINT IS THAT FOR PEOPLE WHO EARN MORE THAN $75,000 A YEAR, THIS IS GOING TO BE A TAX INCREASE, THAT IT WILL SHIFT MORE OF THE BURDEN ON THEM. WHAT'S THE PRICE TAG TO GIVE THEM A TAX CUT? I MEAN THESE ARE THE KINDS OF PEOPLE WE WANT TO ATTRACT TO IOWA. THIS IS PART OF THE MOTIVE THE GOVERNOR HAS IN PROPOSING THIS. WHY CAN'T YOU REPUBLICANS COME UP WITH A GOOD OLD-FASHIONED INCOME TAX CUT AND EVERYBODY'S HAPPY?

Johnson: THAT'S -- IT'S EASY TOSAY, ISN'T IT?

Yepsen: WELL, HOW MUCH DOES IT COST?

Johnson: TO DO WHICH PART?

Yepsen: TO GIVEEVERYBODY AN INCOME TAX CUT AS PART OF THAT PACKAGE AND --

Johnson: JAMIE, DO YOU?

Van Fossen: THE10-PERCENT ACROSS-THE-BOARD INCOME TAX WAS ABOUT $208 MILLION.

Yepsen: SO IT WOULD BE A SERIOUS INCOME TAX CUT IN ORDER TO TRY TO HOLD EVERYONE HARMLESS.

Johnson: I THINK THIS GROUP, THOSE MAKING 75,000 AND ABOVE, I BELIEVE THAT THE GOVERNOR'S PLAN TAKES INTO ACCOUNT ABOUT A 5-PERCENT INCREASE ON THAT GROUP, AND THEN WITHIN EACH OF THE GROUPS THAT ARE -- THE NEW RATE GROUPS, THERE IS SOME SHIFTING WITHIN THAT GROUP AS WELL. THERE WILL BE SOME PAYING MORE, SOME PAYING LESS. NO ONE IS HELD HARMLESS.

Yepsen: I WANT TO SWITCH GEARS, SENATOR JOHNSON, AND MOVE TO SOMETHING YOU'VE BEEN WORKING ON IN THIS SESSION, AND THAT'S THIS ISSUE OF THE LOCAL OPTION SALES TAX FOR SCHOOLS. YOU HAVE SUGGESTED THAT WE TRY TO FIND SOME SYSTEM IN IOWA WHEREBY RURAL COUNTIES CAN SHARE IN SOME OF THE TAX REVENUE THAT URBAN COUNTIES GENERATE BY PASSING LOCAL OPTION SALES TAXES.

Johnson: CORRECT.

Yepsen: WHERE DOES THAT STAND?

Johnson: WELL, I'M WORKING HARD ON IT. IT'S AN UPHILL BATTLE. WHEN WE PASSED THIS -- WHEN WE WE GAVE URBAN DISTRICTS THE TOOLTWO YEARS AGO, I WAS GIVEN THE WORD OF SEVERAL LEGISLATORS THAT THEY KNEW THAT THERE WERE INEQUITIES BEING CREATED BUT WE WOULD TRY TO WORK ON IT AND GET IT RESOLVED. THAT HASN'T HAPPENED YET. WE HAVE CREATED A GREAT INEQUITYAMONG OUR KIDS THROUGHOUT THE STATE. I'M LOOKING FOR A WAY THAT WE CAN USE THESE LOCAL OPTION TAX DOLLARS. WE RAISE ABOUT $280 MILLION A YEAR IN A 1-CENT SALES TAX. AND HAVING THOSE DOLLARS AVAILABLE SPREAD ON A PER-PUPIL BASIS AND EVEN DRAWING THE PROPERTY VALUATION INTO THE FORMULA, BUT TO USE ON A PER-PUPIL BASIS AROUND THE STATE IS, I BELIEVE, THE BEST USE OF THE MONEY.

Yepsen: ARE YOU GOING TO BE ABLE TO MOVE THE BILL OUT OF THE SENATE?

Johnson: IT'S UNCERTAIN AT THIS POINT. I'M STILLWORKING AT IT.

Yepsen: WHAT ABOUT THE HOUSE?

Van Fossen: THE HOUSE IS A LITTLE LESS EXCITED ABOUT THAT. THERE ARE SOME MEMBERS OF THE MAJORITY CAUCUS THAT WOULD LIKE TO MOVE A BILL SIMILAR TO WHAT REPRESENTATIVE, OR EXCUSE ME, SENATOR JOHNSON HAS PROPOSED, BUT IT'S GOING TO BE TOUGH. I THINK WE HAVE -- IT'S BECOMING APPARENT WITH THIS 1-CENT SALES TAX, PROBABLY THE MORE EQUITABLE WAY WOULD HAVE BEEN TO RAISE IT A PENNY STATEWIDE. I WOULDN'T HAVE SUPPORTED THAT. I DIDN'T SUPPORT THIS 1-CENT SALES TAX LOCAL OPTION EITHER, BUT IT'S BECOMING APPARENT THIS IS AN ANSWER FOR URBAN SCHOOLS. I THINK IN A PIECE OF LEGISLATION THAT'S PROPOSED COMING OUT FROM THE GOVERNOR,THE MILLENNIUM FUND, AND THE V.I.P. PROGRAM, THAT REPUBLICANS ARE PROPOSING, THERE IS A RURAL PIECE THAT WE NEED TO LOOK AT RURAL INFRASTRUCTURE. AND IN THEREPUBLICAN PLAN THE RURAL INFRASTRUCTURE WILL COME OUT OFTHE INFRASTRUCTURE FUND, ABOUT $20 MILLION.

Yepsen: SOYOU'RE SAYING RURAL SCHOOLS WILL GET A LITTLE SOMETHING OUT OF THIS SESSION OF THE LEGISLATURE TO MAKE UP FOR THAT INEQUITY.

Van Fossen: WE'RE LOOKING AT ö

Borg:YOU SAID YOU WOULD LIKE TO HAVE SEEN A STATEWIDE -- NOT A LOCAL OPTION BUT A STATEWIDE 1-CENT INCREASE. IS THERE AWAY TO GET THE GENIE BACK IN THE BOTTLE AND DO THAT?

Van Fossen: I DON'T THINK SO. I DIDN'T SAY I WOULD LIKETO SEE THAT. I SAID THAT WOULD PROBABLY HAVE BEEN A MORE EQUITABLE WAY AND THEN DISTRIBUTE IT PER PUPIL. I DON'TTHINK THAT IS A PROPOSAL, I DON'T THINK THAT'S A SERIOUS PROPOSAL.

Johnson: I THINK WE'RE MISSING A REAL OPPORTUNITY HERE, THOUGH. WE'VE SUPPORTED -- THE ONLY WAY WE ARE ABLE TO FUND OUR SCHOOL BUILDINGS IS WITH LOCAL PROPERTY TAX, AND NOW WE'VE ADDED THIS OPPORTUNITY TO USE THE LOCAL OPTION SALES TAX. IF WE CAN MOVE TO A LOCAL OPTION FUNDING MECHANISM FOR OUR SCHOOLS, WE HAVE THAT OPPORTUNITY TO REDUCE PROPERTY TAXES. I THINK WE NEED TO CONTINUE TO WORK TOWARDS THIS GOAL. I ATTENDED A MEETINGHERE IN DES MOINES THE OTHER NIGHT OF A NEIGHBORHOOD ASSOCIATION TALKING ABOUT THE LOCAL OPTION TAX. THE SUPERINTENDANT FOR THE DES MOINES SCHOOLS THREW OUT THE ANALOGY OF WHAT WE'RE IN RIGHT NOW IS SIMILAR TO A FISHERMAN THROWING A LOT OF CRABS INTO A BASKET AND WHEN THAT LONE CRAB STARTS TO REACH THE TOP OF THE BASKET, ALL THE OTHERS ARE PULLING HIM DOWN. I'D LIKE TO THROW A DIFFERENT LIGHT ON THAT. I WOULD LIKE TO SEE THAT CRAB AT THE TO PREACHING DOWN TO LIFT THE OTHERS UP. WE NEED TO LOOK ON THE POSITIVE. I THINK WE HAVE THAT OPPORTUNITY. I WANT TO BRING THE RURAL AND URBAN PEOPLE TOGETHER TO SOLVE THIS PROBLEM.

Yepsen: SENATOR, THIS IS A RURAL AND URBAN ISSUE.

Johnson: ABSOLUTELY. ABSOLUTELY.

Yepsen: URBAN AREAS OF THE STATE SEND TAX DOLLARS BACK TO RURAL AREAS OF THE STATE IN THE FORM OF THE INCOME TAX AND GAS TAX REVENUES. IF URBAN AREAS ARE GOING TO BE ASKED TO SHARE THEIR SALES TAX REVENUES, DO YOU SUPPOSE RURAL FOLKS WOULD BE WILLING TO SHARE MORE OF THE GAS TAX AND INCOME TAX REVENUES THAT THEY NOW GET?

Johnson: WELL, WE HAVE ALOT OF FUNDING FORMULAS OUT THERE THAT IF YOU WERE TO PUT THEM ON A PER-PUPIL BASIS, OR ON A PER-PERSON BASIS, ARE NOTTREATED EQUALLY. I MEAN POLK COUNTY RETAINS, WHAT, $23 MILLION FROM PRAIRIE MEADOWS, WHICH CERTAINLY COMES FROM A SURROUNDING AREA. THE BULK STAYS HERE. THERE ARE A LOT OF THINGS THAT ARE NOT ON A PER-PERSON BASIS SPREAD THROUGHOUT THE STATE. I AM NOT PREPARED TO COMPARE A ROADWITH A CHILD. I THINK EVERY CHILD IN THIS STATE DESERVES AN EQUAL OPPORTUNITY AT A GOOD EDUCATION. WE'RE REALLY SEEING A BIG DIVIDE NOW BETWEEN OUR RURAL AND URBAN SCHOOLS. IT'S DIFFICULT TO HIRE TEACHERS AND RETAIN THEM. I HAD AN URBAN ADMINISTRATOR TELL ME ABOUT A MONTH AGO, SAID I HIRE MY BEST TEACHERS OUT OF STEWART, MENLO, AND PERRY. THAT'S WHAT'S HAPPENING IS THAT THEY'RE ABLE TO PAY HIGHER SALARIES, ATTRACT TEACHERS. THE RECENT ARTICLES IN "THE DES MOINES REGISTER" INDICATED LOWER TEST SCORES, FEWER CLASSES OFFERED IN THE RURAL AREAS. THIS WILL JUST EXACERBATE THE PROBLEM.

Beck: WE'LL STAY ON THAT TOPIC. THE GOVERNOR HAS RECOMMENDED THAT WE HAVE SPECIAL TAX CREDITS FOR TEACHERS AND FOR ENGINEERS TO LURE THEM INTO THE STATE OR KEEP THEM IN THE STATE SO MANY OF IOWA'S TEACHERS AND ENGINEERS LEAVE THE STATE AFTER GETTING AN EDUCATION. ARE THOSE TAX CUTS A POSSIBILITY, REPRESENTATIVE VAN FOSSEN?

Van Fossen: WELL, FIRST OF ALL, I'D LIKE TO SAY I'M HAPPY THE GOVERNOR ADMITS THAT PEOPLE DO MAKE DECISIONS BASED ON TAXES. I THINK THAT'S WHAT WE'VE BEEN DOING THE LAST SIX YEARS WITH TAX CUTS. WE'VE BEEN TRYING TO GET FOLKS TO CHANGE THEIR MIND. WE'VE BEEN TRYING TO ALLOW ECONOMIC COMPETETIVENESS IN THIS STATE. HAVING SAID THAT, I THINK A MORE FAIR WAY WOULD BE ACROSS-THE-BOARD TAX CUT. WE'LL TALK ABOUT THAT IN A SECOND. THE TEACHERS AND ENGINEERS TAX CREDIT SETS UP A DIVIDE. I HAVE PROPOSAL TO ALLOW FOR RESEARCH AND DEVELOPMENT AN ALTERNATIVE CREDIT FOR WHAT THE FEDERALGOVERNMENT ALLOWS ON THEIR TAXES. WE NEED TO DO THAT IN IOWA SO WE'RE BUILDING RESEARCH AND DEVELOPMENT SITES AND BRINGING THOSE ENGINEERS INTO THE STATE TO BE EMPLOYED, NOT GIVING THEM A SPECIAL TAX BREAK SO THEY WILL LEAVE THE STATE.

Yepsen: WHAT ABOUT ACROSS-THE-BOARD TAX CUTS? TALK ABOUT THAT NOW.

Van Fossen: EXACTLY. WE TALKED ABOUT THAT A LITTLE EARLIER; IT'S $208 MILLION. IT'S A LOT OF MONEY FOR AN ACROSS-THE-BOARD TAX CUT. I DON'T SEE THAT ON THE TABLE. ALTHOUGH, WHEN YOU CONSIDER VERSUS LAST YEAR THAT THE GOVERNOR PROPOSED ANOTHER $200 MILLION IN SPENDING, WE CERTAINLY COULD HAVE DONE A TAX CUT WITH THAT. IT'S ALL A MATTER OF SETTING PRIORITIES TOO.

Yepsen: SENATOR, BACK TO JENEANE'S QUESTION. TAX CUTS FOR ENGINEERS AND TEACHERS. WILL IT FLY IN THE SENATE?

Johnson: NO, IT'S VERY DIFFICULT TO SPECIFY SPECIFIC OCCUPATIONS. WHAT ABOUT THAT NURSE OR OTHERS OUT IN THE COMMUNITY WHERE THEIR JOBS ARE JUST AS IMPORTANT.

Yepsen: WHO'S ESSENTIAL.

Johnson: THAT'S CORRECT.

Yepsen: ANOTHER ISSUE THAT'S UP THERE IS THIS QUESTIONOF THE TAX FREEDOM DAY. IT'S SORT OF SOMETIME IN AUGUST, THERE'S NOT GOING TO BE ANY SALES TAX ON CLOTHING AND SHOES SO WE CAN ALL PAY FOR THE BACK-TO-SCHOOL CLOTHES WITHOUT PAYING A SALES TAX. SENATOR, IS THAT GOING TO GO ANYWHERE IN THIS LEGISLATURE?

Johnson: IF THE HOUSE PASSES IT OVER TO US, WE'LL CERTAINLY TAKE A LOOK AT IT. WE DON'T HAVE A COMPANION BILL IN THE SENATE, SO WE'LL WAIT FOR THEIRS TO COME OVER.

Yepsen: MR. VAN FOSSEN, STARTS IN THE HOUSE?

Van Fossen: IT STARTS IN THE HOUSE. WE PASSED IT OUT OF THE WAYS AND MEANS COMMITTEE. IT WILL BE ON THE FLOOR. IN FACT, WE PLAN ON PASSING THE BILL NEXT WEEK. IT'S A TAX FREEDOM HOLIDAY, WE CALL IT NOW; IT'STHE WHOLE WEEKEND.

Yepsen: WHICH WEEKEND?

Van Fossen: FIRST WEEKEND IN AUGUST, RIGHT BEFORE THE FAIR. SO WE'RE NOT GETTING IN TROUBLE WITH THE FAIR.

Yepsen:HOW MANY DAYS?

Van Fossen: HOW MANY DAYS? THREE DAYS: FRIDAY, SATURDAY, AND SUNDAY. AND IT WILL, ASYOU SAID, IT WILL ALLOW PARENTS, AS THEY PREPARE THEIR CHILDREN TO GO BACK TO SCHOOL, TO PURCHASE CLOTHING AND ACCESSORIES, SUCH AS ö

Beck: WHAT'S THE PRICE TAG ON THAT?

Van Fossen: THREE DAYS WOULD BE ABOUT $3 MILLION. BUT WE ALSO SEE IT AS A KIND OF A LOST LEADER IN STORES. IF YOU'RE FAMILIAR WITH RETAIL, YOU BRING PEOPLE IN, THEY WILL BE BUYING OTHER PRODUCTS THAT WILL STILL HAVE THE SALES TAX ON. IT'S HAPPENED IN OTHER STATES THAT THEY SAW SALES INCREASE TWO-FOLD.

Yepsen: WE'VE GOT JUST A FEW MINUTES AND TOO MANY QUESTIONS. SO MR. VAN FOSSEN, ONE OTHER SCHOOL-RELATED TAX POLICY ISSUE UP THERE IS THIS IDEA THAT THE LOCAL INCOME TAX SURTAX THAT MANY SCHOOL DISTRICTS IMPOSE ON THEMSELVES COULD BE USED TO RETIRE BONDS FOR SCHOOLS THAT WANT TO BUILD BUILDINGS. IS THAT GOING TO FLY IN THE LEGISLATURE?

Van Fossen: NO, I'VE DECIDED THAT'S COME FROM THE LOCAL GOVERNMENT. KIND OF CONCEPTUALLY PROBABLY A GOOD IDEA, BUT I DON'T SEE -- IT WOULD ALLOW UP TO TWO PERCENTAGE POINTS ON YOUR INCOME TAX CUT INCREASE. FOR THOSE LOCAL AREAS, I DON'T THINKIT'S A GOOD IDEA.

Beck: EXCUSE ME, ANOTHER LOCAL GOVERNMENT ISSUE IS THAT MANY COUNTIES AND CITIES COMPLAIN THAT THEY HAVE THESE SET-ASIDE DISTRICTS, THEY'RE CALLED TIFF DISTRICTS, THAT ALLOW TAX BREAKS SO THAT THEY CAN ENCOURAGE DEVELOPMENT AND ECONOMIC DEVELOPMENT. BUT OTHERS SAY THAT PUTS THE PROPERTY TAX, THEN, ON OTHER BURDEN TO OTHER TAXPAYERS. WHAT ARE WE GOING TO DO ABOUT THOSE TIFF DISTRICTS?

Johnson: LAST YEAR WE PASSED A BILLWHICH REQUIRED ALL OF THE TAXING AUTHORITIES THROUGHOUT THE STATE TO REPORT BACK TO US BY JANUARY 1. WE HAVE NOT RECEIVED THAT REPORT YET. I TALKED WITH THE DEPARTMENT OF MANAGEMENT JUST YESTERDAY TO TRY TO JACK THEM UP A LITTLE BIT TO GET THAT REPORT INTO US. WE WANT TO TAKE A GOOD, HARD LOOK HOW TIFF HAS BEEN USED AND WHETHER IT'S BEEN ABUSED.

Yepsen: MR. VAN FOSSEN, ANOTHER TAX ISSUE UP THERE INVOLVES THE PROPERTY TAX SYSTEM. WE HAVE A SYSTEMIN IOWA THAT TIES URBAN AND RURAL PROPERTY TOGETHER, BUT THAT IS HAVING THE EFFECT OF SHIFTING THE PROPERTY TAX BURDEN ONTO COMMERCIAL PROPERTIES. WELL, WE HEAR THIS FROM BUSINESS TYPES.

Van Fossen: RIGHT.

Yepsen: THEY SAY IT'S DISCOURAGING ECONOMIC DEVELOPMENT. WILL THIS LEGISLATURE DO ANYTHING ABOUT THAT?

Van Fossen: WE'RE LOOKING AT A PROPERTY TAX LIMITATION BILL. YOU'RE SPEAKING ABOUT THE RESIDENTIAL ROLLBACK. IT'S REALLY NOT A SHIFT THAT IN THE SENSE THAT COMMERCIAL STAYS AT 100 PERCENT. SO TAXES AREN'T BEING SHIFTED; THEY'RE BEINGSHIFTED IN THE CLASS OF AG AND RESIDENTIAL, IN A SENSE. THE PROPERTY TAX LIMITATION BILL WOULD TAKE SOME OF THAT FLUCTUATION OUT OF THE SYSTEM. IT WOULD PROVIDE FOR AN EASIER ROUTE FOR DIRECT PROPERTY TAX RELIEF FOR THE CITIZENS. BASICALLY WHAT IT WOULD DO WOULD BE TAKE THE LAST THREE-YEAR AVERAGE OF WHAT YOU'VE BEEN COLLECTING IN PROPERTY TAX AND THEN ADD AN INFLATION FACTOR, WHICH IS STATE AND LOCAL GOVERNMENT INFLATION FACTOR, AND THEN YOU ALSO BE ABLE TO ADD ON ALL THE NEW CONSTRUCTION.

Yepsen: THAT WOULD APPLY ONLY TO CITIES AND COUNTIES.

Van Fossen: CITIES AND COUNTIES, NOT SCHOOLS.

Yepsen:WILL THAT FLY IN THE SENATE, SENATOR?

Johnson: IT DID NOT COME OUT OF LOCAL GOVERNMENT. AND AGAIN, THAT'S ONE THAT WE'RE WAITING FOR THE HOUSE TO SEND US OVER.

Beck: AN ANNUAL QUESTION IS WHETHER WE SHOULD REDUCE TAXES ON PENSIONS OR SOCIAL SECURITY OR EVEN ELIMINATE THEM ALTOGETHER. WHERE IS THAT THIS YEAR?

Johnson: IF THERE'S MONEY AVAILABLE, I'D LIKE TO TAKE A LOOK AT THE PENSION. WE'VE LOOKED AT THE SOCIAL SECURITY, BUT WITHTHE REVENUES RUNNING WHERE THEY ARE, I THINK THAT'S PROBABLYTOO BIG OF A PRICE TAG THIS YEAR.

Borg: I JUST WANTED TO ASK BEFORE WE END THE PROGRAM, YOU TALKED ABOUT THE TAX HOLIDAY. A LOT OF PEOPLE ARE TAKING A TAX HOLIDAY BY ORDERING OVER THE INTERNET. FEDERAL GOVERNMENT IS TAKING A LOOK AT THAT, BUT WHAT SHOULD IOWA BE DOING?

Van Fossen: WELL, THAT'S REALLY NOT A NEW PROBLEM. I THINKTHAT IT SEEMS LIKE A NEW PROBLEM BECAUSE YOU WATCH THE SUPERBOWL AND ALL THESE PROGRAMS, AND DURING CHRISTMAS TIMEYOU HAVE ALL THESE .COM ADVERTISERS, BUT REALLY IT'S A PROBLEM THAT GOES BACK WITH CATALOG SALES TOO. IF YOU DON'T HAVE NEXUS IN THE STATE, IT'S A SUPREME COURT RULING, THAT YOU CAN'T COLLECT SALES TAX. YOU DO OWE THE USE TAX-- THAT'S A VOLUNTARY TAX -- AND THAT SEEMS TO BE A PROBLEM. YOU LOOK AT THE LAST CHRISTMAS SEASON, AND 80 PERCENT OF THE SHOPPERS IN NOVEMBER SAID THEY WOULD SHOP AT THEIR LOCAL STORE, 40 PERCENT SAID THEY WOULD DO IT THROUGH THE CATALOGS, AND 10 PERCENT WOULD DO IT ON-LINE. WE'RE NOT GOING TO -- I WOULD HOPE THAT IOWA WOULD NOT GET OUT FRONT ON TAXING THE INTERNET BECAUSE IT'S SUCH A NEW AND VITAL TECHNOLOGY TOOL FOR THE STATE. WE DON'T WANT TO BE FIRST TO TAX THE INTERNET.

Borg: IS THAT YOUR VIEW, SENATOR JOHNSON?

Johnson: BASICALLY. AT THE SAME TIME WE NEED TO BE VERY AWARE OF THE EQUITY ISSUE FOR OUR MAIN STREET BUSINESSES. WE NEED TO MAKE SURE THAT EVERYONE IS TAXED EQUALLY. SO I AGREE WITH REPRESENTATIVE VAN FOSSEN THAT YOU DON'T WANT TO BE OUT FRONT TAXING AHEAD OF EVERYONE ELSE; YOU WILL KILL E-COMMERCE WITHIN THE STATE. BUT WE NEED TO BE READY TO MOVE WHEN EVERYONE ELSE DOES TO MAKE SURE THINGS ARE FAIR FOR OUR MAIN STREET BUSINESS.

Borg: FINAL QUESTION, DAVID.

Yepsen: SENATOR, YOU MENTIONED A TAX BREAK OF SOME KIND FOR DISABLED PEOPLE. WHAT WOULD THAT BE?

Johnson: IT'S A CREDIT,ACTUALLY, FOR EMPLOYERS THAT HIRE DISABLED. THEY WOULD GET A CREDIT FOR PUTTING IN EQUIPMENT AND UPGRADING THEIR FACILITIES.

Yepsen: HOW MUCH WOULD THAT SAVE THE TAXPAYERS?

Johnson: HOW MUCH WOULD IT SAVE THE TAXPAYER? IT WOULD BE -- WE'RE LOOKING AT ABOUT A $5-TO $600,000 TO THE STATE TREASURY TO PROVIDE THAT CREDIT FOR EMPLOYERS.

Borg: JUST LIKE REVENUE, TIME IS FINITE TOO. ON OUR NEXT EDITION OF IOWA PRESS, OUR FOCUS REMAINS ON THE LEGISLATIVE SESSION OF 2000, SPECIFICALLY THE JUDICIARY COMMITTEES. JOINING US ARE THE CHAIRMAN OF THE COMMITTEES DEALING WITH PRISONS, CRIME, SENTENCING, AND RELATED ISSUES. WE'LL BE QUESTIONING SENATOR ANDY MCKEAN OF ANIMOSA AND REPRESENTATIVE CHUCK LARSON OF CEDAR RAPIDS. THAT WILL BE NEXT SUNDAY AT NOON HERE ON STATEWIDE IOWA PUBLIC TELEVISION. AND YOU'VE NO DOUBT NOTED ALREADY THAT OUR ANNUAL FRIENDS FESTIVAL IS WELL UNDERWAY. WE ASK THAT YOU REMEMBER IOWA PRESS WHEN CONSIDERING YOUR NEW PLEDGE OR YOUR PLEDGE RENEWAL. IOWAPRESS IS AN IMPORTANT ELEMENT OF THE LOCAL PROGRAMMING PRODUCED BY IOWA PUBLIC TELEVISION. AND QUALITY LOCAL PROGRAMS ARE MADE POSSIBLE WITH THE SUPPORT OF FRIENDS OF IOWA PUBLIC TELEVISION. THOSE FRIENDS ARE OUR WEEKLY VIEWERS, FRIENDS LIKE YOU. THANK YOU FOR YOUR CONTINUED SUPPORT. AND THAT'S IT FOR THIS SUNDAY'S EDITION OF IOWA PRESS. UNTIL NEXT SUNDAY AT NOON, I'M DEAN BORG. THANKS FOR BEING WITH US TODAY.