DES MOINES, Iowa (AP) — Legislative leaders began grappling Tuesday with Gov. Terry Branstad's plan to slash the property taxes that businesses pay in Iowa, but the divisions that blocked action on a similar plan last year are surfacing again.
Brandstad wants to cut commercial and industrial property taxes by 40 percent over eight years, but unlike last year's proposal, the new plan includes state funding to help cover the lost revenue to local governments. The Republican calls it a compromise, but it isn't enough to convince some lawmakers and public schools, which rely heavily on property taxes for funding.
Senate President Jack Kibbie, an Emmetsburg Democrat, said he would block the Senate from even debating the governor's plan and dismissed a separate property tax cut proposal approved in the GOP-controlled House because both rely on economic growth.
"That's pretty hard to predict," Kibbbie said Tuesday. "We'll go another direction."
Under the governor's plan, the state would provide $50 million in the first year, $100 million in the next, and gradually increase it to $240 million by the eighth year as the property tax decreases. The state funding would come from general state revenue.
The proposal also includes a trigger in later years that would delay the tax cut if state tax collections weren't growing. The governor has warned that commercial property taxes in Iowa are far out of line with neighboring states and need to be changed.
The House Ways and Means Committee began reviewing details of the complex proposal on Tuesday. But committee Chairman Rep. Tom Sands, a Wapello Republican, made clear that an agreement wouldn't be reached anytime soon. He noted that the House has approved a plan to trim property taxes by having the state assume the full cost of elementary and secondary schools, and that his committee would need to merge the two plans.
Branstad spokesman Tim Albrecht said he was optimistic because the governor has provided money to make up for what local governments would lose through the tax cut.
"Our bill is a compromise," Albrecht said. "We have come a long way."
Others weren't convinced.
"Anytime you shrink the tax base, the burden is shifted to other taxpayers," said Margaret Buckton, who represents the Urban Education Network, a coalition of the state's largest schools.
While Branstad's package calls for using state dollars to replace lost property taxes, Buckton warned that the plan doesn't set aside enough money to make up the loss and that schools have little faith the governor and lawmakers would actually pass along the money.
The Senate has taken a different tack, targeting a much smaller plan to smaller businesses by giving them an exemption for a portion of their assessed value, with a varying price tag in a series of proposals.
"It depends on how much money we put into it," said Kibbie, the Senate president. "Everybody is on board to do something."
Similar divisions met the governor's proposal last year. Although lawmakers stayed in session until the end of June, they were never able to resolve their differences. Top lawmakers have vowed to end this election-year session even before its scheduled adjournment in mid-April.
"There's hope that people can find a compromise, because people are working together," said House Democratic Leader Kevin McCarthy, of Des Moines. "In terms of actually striking a deal that doesn't cause one of the classes of property or local government to come unglued is very tricky."
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