Key Iowa senator: No tax cuts before earned income tax credit expansion

Iowa Senate Ways and Means Committee Chair Joe Bolkcom took to the Senate floor today with a clear message for Iowa House Republicans and Governor Terry Branstad: “no tax cut will pass the Senate Ways and Means Committee” until an expansion of Iowa’s earned income tax credit has been signed into law.

The federal government established the earned income tax credit in the 1970s, and Iowa created its version of this tax credit in 1989. According to an Iowa Fiscal Partnership policy brief by former state legislator Charles Bruner, “Many states set their [earned income tax] credit at a much larger percentage of the federal credit than Iowa.” In that brief, Bruner set out three solid arguments for expanding Iowa’s earned income tax credit.

• Increasing the EITC would begin to address one of the biggest inequities in Iowa’s tax code, the tax treatment of working families with children. By any measure, working families with children pay disproportionately more in state income taxes than either retired or childless taxpayers.

• Increasing the EITC would better reflect the ability to pay income taxes. Currently, working families with children begin paying state income taxes before they even earn enough to meet basic household needs.

• Increasing the EITC would increase the ability of low-income working families to purchase basic goods and services that contribute to local economic activity and therefore to economic recovery.

Iowa’s EITC now reaches over 250,000 adults (14 percent of Iowa’s 18-64 population) and over 260,000 children (37 percent of Iowa’s 0-17 population). Increasing the EITC would provide needed help to this important part of Iowa’s population and Iowa’s future.

Expanding this tax credit was the top tax policy priority for the Democratic-controlled Iowa Senate during the 2011 legislative session. Twice House Republicans agreed to the measure as part of broader legislation. Governor Branstad used his line-item veto to remove the provision from bills he signed in April and July. He didn’t give a substantive reason for wanting to deny a tax benefit to hundreds of thousands of working Iowa families. Instead, he cited “my desire to approach tax policy in a comprehensive and holistic manner.”

I still think those vetoes were monumentally stupid. Branstad may have thought he was increasing his leverage with Democratic senators, but in reality he gave them no reason to think he would negotiate in good faith on taxes.

This year the governor and Iowa House Republicans want various corporate income tax cuts and a substantial reduction in commercial property taxes. But State Senator Joe Bolkcom promised today that he will not let any tax bill through the Senate Ways and Means Committee until the “working families tax cut” becomes law. I enclose a video clip and transcript of his floor remarks below.

Last year, as chair of the Senate Ways and Means Committee, my job was to cut taxes on working Iowa families.  I’m talking about EITC, the Earned Income Tax Credit.

This is Iowa’s version of the federal earned income tax credit, the tax cut which was first signed into law by President Ronald Reagan.  This is a pro-family, pro-economic growth, pro-work tax cut.  It helps working families with children making less than $45,000 a year.

When you cut taxes for these working families, the money won’t be spent on yachts, third homes or stashed in Swiss Bank Accounts.  Cut taxes for working Iowa families and they will use it to buy things from local Iowa businesses: things like milk, gas, pay for rent, fix their car, put food on the table.

So, anyway, last year I felt “confident Iowa lawmakers will OK tax cut.”

I was confident when this working family tax cut unanimously passed the House and Senate, but the Governor vetoed it.

I was confident when we passed the working family tax cut a second time, but the Governor vetoed it again.

Here’s what I’m confident about this year:

This year I’m confident that no tax cut will pass the Senate Ways and Means Committee before the working families tax cut is passed for the third time by the Senate, is passed for the third time by the House, and finally signed into law by Governor Branstad.

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