IA-Gov: AFSCME backs Olson, Hatch releases income tax plan (updated)

Yesterday was a big news day for two Democratic candidates seeking to unseat Governor Terry Branstad. Iowa’s largest labor union endorsed State Representative Tyler Olson, while State Senator Jack Hatch released a major tax reform proposal. Details are after the jump.

UPDATE: Added excerpts from Danny Homan’s November 2 guest editorial for the Des Moines Register below.  

The American Federation of State, County, and Municipal Employees Iowa Council 61 represents more workers statewide than any other Iowa labor group. Here is AFSCME’s press release for October 30:

DES MOINES – Today, the AFSCME Iowa Council 61 PEOPLE Committee announced its endorsement of Tyler Olson for Governor. AFSCME members joined Representative Olson for an announcement in Des Moines at AFSCME Iowa Council 61’s Union Hall.

“We are proud to endorse Tyler Olson’s candidacy for Governor. AFSCME members were impressed by Tyler’s commitment to strengthen and grow Iowa’s middle class. We know that he will bring Iowans together and focus on making sure that all Iowans have the opportunity to achieve and maintain the American Dream,” said AFSCME Iowa Council 61 President and PEOPLE Committee Chair Danny Homan.

“We were also impressed by the strong campaign organization that his campaign is building. We know that Tyler Olson is the candidate who will end the divisive politics of Terry Branstad by winning on Election Day,” added Homan.

“AFSCME has an incredible track record of standing up for middle class Iowa families and I am proud to have its members’ support. I share AFSCME’s commitment to fighting for middle class families across the state and look forward to working with them and all Iowans ready to move our great state forward,” said Tyler Olson, candidate for Governor.

AFSCME is known for its political action program which is financed with voluntary contributions. The program supplies grassroots volunteers for AFSCME-endorsed candidates.

In Iowa, AFSCME Iowa Council 61 represents 40,000 public employees including law enforcement and correctional officers, firefighters, mental health workers, professional school staff, emergency responders, and many other workers. AFSCME Iowa also represents home health care and child care providers across the state and private sector workers at Prairie Meadows, Palmer College of Chiropractic, Des Moines University, and ABM (Marshalltown).

I don’t see a compelling reason for AFSCME to weigh in so early. I am not aware of any anti-labor vote Hatch has ever cast during his time in the legislature. Nor do I recall Olson being a leader in mostly unsuccessful efforts to get pro-labor legislation through the Iowa House between 2007 and 2010.

Speaking to reporters at yesterday’s press conference, AFSCME’s president in Iowa, Danny Homan, made clear that this endorsement was a political calculation.

AFSCME’s endorsement of a little known state senator from southeast Iowa helped propel Tom Vilsack to victory over Mark McCormick, a well-known ex-judge, in the 1998 Democratic gubernatorial primary.

“He was definitely the dark horse,” Homan said today of Vilsack, “and I’m not that saying Tyler is the dark horse, but Tom Vilsack went against ‘The Establishment’s’ pick…and because of our folks’ activism Tom Vilsack won the Primary, ultimately was elected governor and the rest is history.” […]

According to Homan, AFSCME chose Olson partly because of his record in the legislature.

“We were also impressed by the strong campaign organization that his campaign is building,” Homan said. “We know that Tyler Olson is a candidate that will end the divisive politics of Terry Branstad by winning on Election Day.”

Homan said it was a “hard decision” to back Olson over State Senator Jack Hatch, the other Democratic candidate for governor. Olson and Hatch met privately with a committee of AFSCME members from around the state who were assembled to make the endorsement decision.

“They just liked Tyler’s message better than they liked the message that Senator Hatch delivered,” Homan said. “This is not saying the Senator Hatch is not a good candidate. We’re going to have a difficult primary. We’re going to have to work our tails off to win this primary. We believe Tyler Olson is the guy that has the best chance to beat Terry Branstad and that’s why we made the endorsement.”

So, this choice was about messaging and electability. Obviously, any advocacy group has the right to endorse for whatever reason, but from where I’m sitting, beating Branstad will be an uphill battle in any scenario. I would not want to spend a lot of my group’s resources during the Democratic primary when both potential nominees support my key issues. Then again, AFSCME prefers not to stay on the sidelines during competitive primaries. The same union backed Mike Blouin for governor in 2006 and endorsed Hillary Clinton for president relatively early in the 2008 campaign cycle.

Hatch received a union endorsement this week as well. Here’s the October 29 press release from his campaign:

DES MOINES – The Central Iowa Building and Construction Trades Council Tuesday endorsed State Senator Jack Hatch for Governor.

“Jack Hatch has shown a commitment to working people throughout his career as a legislator and in his private business,” Council President Earl Agan said Tuesday.  “Jack is an entrepreneur who chose to be a partner with union contractors as he built and expanded his business.”  

Hatch said he’s proud of the relationship he’s built with contractors across the state over the past 15 years as a businessman and community developer.  “Our campaign is about improving the quality of life of Iowa families,” Hatch said Tuesday. “Union contractors offer top-quality work but also good pay and benefits for workers, and those things are what make building trades members such great partners.”

The Council represents all trades engaged in building construction and repairs in the Des Moines and Central Iowa area.

The bigger news from the Hatch campaign came yesterday, when the senator revealed details of a major proposed overhaul for Iowa’s income tax system.

HATCH ANNOUNCES INCOME TAX CUT PLAN:

“MIDDLE CLASS INCOME PROTECTION ACT”

DES MOINES – At a Des Moines news conference Wednesday, State Senator Jack Hatch (D-Des Moines) announced a plan for a middle-class income tax cut, known as the “Middle-Class Income Protection Act.”

“No one has been squeezed harder in the Great Recession and its aftermath than the hardworking middle-class Iowa families who are holding down jobs and trying to raise families,” Hatch said Wednesday. “One of the most important things a Governor can do for families is to help them keep a little more of what they’ve earned.”

A review of the Hatch plan by the Iowa Department of Revenue resulted in the following conclusion:

“In tax year 2015, after federal deductibility is completely eliminated, taxpayers with AGI below $200,000 are, in total, expected to see a tax decrease, with the higher filing threshold and higher dependent credit helping those at the bottom, and the modified tax rates helping those in the middle.” (from 10/28/13 IDOR correspondence).

For a family earning between $80,000 and $90,000 annually, the Hatch tax cut will be, on average, $1,013.00.

The two major initiatives driving Hatch’s plan are families with children and dual income households.  Hatch has worked on children’s issues throughout his career and is well aware of the stress on middle-income families when it comes to making ends meet.  And, with Iowa having the highest percentage of dual-income families per capita, many of them located in rural Iowa, Hatch’s plan rewards these hardworking families.

Hatch’s tax cut plan makes five major changes to the current state income tax system, including:

·         Raising the per-child tax credit from $40 to $500.  Hatch said the state’s “current per-child credit of $40 is an embarrassment, and the increase will reward working parents and bring the credit in line with other states that offer meaningful credits.”  

·         Exempting the first $1,000 in secondary earner’s wages.  Because Iowa has the highest percentage of dual-income households, a “dual-wage-earner” credit will give a break to households where both parents have to work to make ends meet and acknowledge the sacrifices that go into working so hard to raise a family.  “Increasingly, the decision to have both parents work outside the home isn’t a decision at all – It’s a necessity,” Hatch said.  

·         Raising filing thresholds for individuals and families.  The filing thresholds for single filers under age 65 (below which there is no tax liability) would go up from $9,000 to $20,000 and for all other filers under age 65 from the current $13,500 to $24,500.  Hatch said the intent with this change is to retain a progressive income tax system while giving middle class taxpayers a break.  

·         Changes to tax rates by bracket and reduction of the top bracket. The current eight rates and brackets would be reduced to just four rates (3 pct, 4 pct, 6.2 and 8.8 pct). The top rate would fall slightly from 8.98% to 8.8%.

·         Elimination of federal deductibility.  Iowa is one of the few states that allows the deduction of federal income taxes paid against state income taxes.  The provision in Iowa’s tax code makes Iowa’s rates appear artificially high.  Note: All of the numbers contained in the Hatch proposal include the elimination of federal deductibility.  

The proposed changes are estimated to reduce the state’s ending balance (surplus) by $309.1 million in tax year 2014 and $304.2 million in tax year 2015 once the elimination of federal deductibility is complete.

The IDOR correspondence to Sen. Hatch, dated October 28, 2013, is available for public review. The proposal is assumed to be effective for tax years beginning on or after January 1, 2014.

Hatch outlined the proposed changes in a statehouse news conference Wednesday.  More information, including the full text of the policy paper entitled “A Middle-Class Income Protection Act,” online at http://www.jackhatch.com/new-i…

Iowa currently has a regressive tax structure, so there’s a lot to like in Hatch’s ideas.

Only three states allow citizens to deduct their federal tax payments for state income tax purposes. Conservative advocacy groups like Iowans for Tax Relief kicked up a huge fuss when Democrats tried to pass a tax reform law in 2009 that would have ended federal deductibility. The bill never cleared the Iowa House, but while it was under consideration, the Iowa Policy Project pointed out some important truths:

Make no mistake: Federal deductibility is a benefit targeted for Iowa’s highest-income families. Some others benefit, but mostly, it is those at higher incomes.

The last, best analysis of this we have shows that the wealthiest 20 percent of Iowa taxpayers receive 80 percent of the tax benefit from federal deductibility (2002 figures). For the other 80 percent of Iowans, the tax cut amounted less than half of 1 percent of their income. Using those 2002 numbers, by the way, the dollar amount of the average tax cut for the top 1 percent of taxpayers was about $13,900 – more than the income of people in the bottom 20 percent.

To understand why wealthier people get the greatest benefits under federal deductibility, consider this: You have to pay federal income tax to get the Iowa deduction. Many Iowans at moderate and low incomes simply do not make enough money to pay income tax to the federal government – but Iowa law still makes them pay income tax.

Branstad’s own tax returns have illustrated how federal deductibility helps some high-income Iowans avoid paying state income taxes.

Any comments about the governor’s race are welcome in this thread. As far as I know, former state legislator Bob Krause still plans to make his campaign official later this year, but based on his 2010 campaign for U.S. Senate, it will be hard for him to raise the funds to compete against Olson and Hatch in the Democratic primary.

UPDATE: The November 2 Des Moines Register carried a guest piece from AFSCME President Danny Homan. He explained why his union prefers Olson to Branstad, but not why AFSCME prefers Olson to Hatch. Excerpts:

In making our decision, AFSCME members were impressed by candidate Olson’s commitment to strengthen and grow Iowa’s middle class. […]

We are confident that he will bring Iowans together and focus on making sure that all Iowans have the opportunity to achieve and maintain the American Dream.

Unfortunately, our current governor has sought to turn Iowans against one another for political gain. He has sought to vilify hard-working public employees and has refused to develop a positive relationship with our organization in order to improve our state and its services to every citizen. Iowa can do better.

In his quest to attack public employees and slash the services they provide, the governor has acted as if he were above the law. He has used illegal line-item vetoes and issued an executive order that violated collective bargaining law. We know that Iowa can do better. […]

Olson has talked with Iowans who are struggling to get by and desperately trying to get ahead in life and join the middle class, and has committed his campaign vision to investing in education, health care, and economic opportunities that create good middle-class jobs.

Terry Branstad has made a long career for himself vilifying his opponents and dividing Iowans for political gain. […]

Conversely, Tyler Olson is building a strong campaign organization focused on positive change.

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