# Federal Deductibility

Terry Branstad's accountability problem

For a guy who claims to be proud of his record, former governor Terry Branstad sure has a funny way of showing it.

On one issue after another, Branstad takes credit for things he didn’t do and evades responsibility for things he did. So, the governor who kept two sets of books boasts about enacting budget reforms that that other people pushed in response to his fiscal mismanagement.

The governor who used state bonding more than once says that politicians who create debt should be voted out of office.

Pressed on his record of expanding gambling in Iowa, Branstad has suggested he had little choice in the matter: “What was I supposed to do? Over 70% of the people wanted it even though I was personally opposed to it.”

Now Branstad is playing the same game on the Road Use Tax Fund and the idea of eliminating federal deductibility from Iowa’s tax system.

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Culver calls for new budget process

Speaking to the annual meeting of the Iowa Farm Bureau Federation today, Governor Chet Culver said the way Iowa drafts its budgets should be changed:

Currently, the governor said he is required to submit a state budget by the end of January based on projections set by the state Revenue Estimating Conference in December, but then lawmakers craft their spending plan after the REC’s next quarterly estimates in March.

“That makes no sense at all. For three months, we sit around and wait for the March number in many cases before serious budget discussions take place,” he said. “We have a moving target. It is terribly frustrating and we need to make some changes.”

Several accounting experts have told me that it is impossible to estimate state revenues accurately. The current system leads to budget surpluses when the economy is doing well and shortfalls requiring rapid cuts when the economy heads downhill.

As usual, Iowa State University economist Dave Swenson has a better idea. Speaking to the Des Moines Register in October,

Swenson said he believes the budget-setting system is backward. Government should look at annual needs and adjust taxes and fees to accomplish goals. Instead, officials adjust needs by what’s available.

“It is a stupid system and makes no sense,” Swenson said.

The most recent Iowa poll for the Des Moines Register showed that broad majorities support increased state spending on various programs that Democrats have expanded in recent years. Even a majority of self-identified conservatives supported maintaining higher spending levels for teacher pay, state aid to schools, renewable energy research and development, health care coverage for children and repairing roads and bridges.

If politicians evaluate our state’s needs and then search for a way to fund them, we are likely to get some changes on the revenue side of the equation. Eliminating certain tax credits could increase revenue, and Culver has created a panel that will evaluate all of the state’s current tax credits before making recommendations for state legislators.

Our state income tax structure should also be on the table. A new poll by Selzer and Associates for the Iowa Fiscal Partnership found that a majority of Iowans would support eliminating federal deductibility, which mainly benefits high-income taxpayers. During the 2009 legislative session, Culver and legislative leaders agreed on a tax reform package that would have ended federal deductibility, but Iowa House leaders were unable to find 51 votes to pass that bill.

UPDATE: More details from the Des Moines Register are after the jump.

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Will GOP hopefuls disavow Failor's Nazi analogy?

Three Republicans who may run for governor attended a June 15 event in Boone featuring Ed Failor, leader of Iowans for Tax Relief. During a typical Republican speech about how Democrats are wrecking the country, Failor went beyond boilerplate rhetoric and likened Democratic economic policies to events in Nazi Germany in 1933.

Iowa Democratic Party leaders want to know whether State Representative Chris Rants, State Senator Jerry Behn, and Secretary of Agriculture Bill Northey agree with Failor’s analogy. After the jump I’ve posted an action alert asking Iowa Democrats to contact Behn, Rants and Northey to ask them if they agree with Failor’s remarks, and if not, why they didn’t speak up at the time.

The Boone News Republican followed up on the story today and posted a longer excerpt from Failor’s speech. I’ve posted that after the jump as well, though from where I’m sitting the larger context doesn’t make him look any less unhinged.

I doubt any Republican will distance himself from Failor. Iowans for Tax Relief and its members could be helpful during next year’s gubernatorial primary. Speaking to the Boone Times Republican, Behn dismissed the incident as much ado about nothing. Failor’s in no mood to apologize either:

“I was very careful to say that I like Pat Murphy, he is a good guy,” Failor said.

When you have a political disagreement with a “good guy” you like, do you say he is “behaving as a jack-booted Nazi”? Neither do I.

Failor added that he completely stands by his statement. He said that previous examples of political parties that succeed in taking too much power never end up being successful, or good for a country’s well-being.

“When you try to find an example of one party, normally by election and fairly, taking over means of production, it never works out well,” Failor said. “I stand by that, if you are a student of history you will know there is no example of that where it didn’t go terribly wrong eventually. And, in many cases, it started with the best of intentions.”

Can’t say that I’m too impressed by Failor as a “student of history.”

Only three states (Iowa, Louisiana and Alabama) allow citizens to deduct their federal tax payments on their state income tax returns. Yet to Failor, Democratic efforts to make our tax code more like laws in 47 other states is tantamount to “taking over means of production.” Ejecting people who were disrupting a public hearing from the legislative chamber is comparable to how Nazis treated their political opponents.

I don’t pretend to understand the psychological need to elevate a dispute over tax policy into some heroic struggle against dictatorship. I doubt dire warnings about fascism (or Marxism, depending on your paranoid mood) are going to scare Iowans back into electing Republicans.

Share any relevant thoughts in this thread.

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Tax reform stalled, bonding package still moving

I was expecting a showdown in the Iowa House this week over the tax reform package that Governor Chet Culver worked out with key Democratic legislators. Republican State Representative Chris Rants announced his intention to amend the tax bill so that marriage would be defined as between a man and a woman.

However, the tax bill never came up for a vote before legislators went home for the weekend. House Speaker Pat Murphy said on April 15 that he had only 50 votes in favor of the proposal:

According to Murphy, he had lined up 52 Democrats to vote for the bill, but two Democrats changed their minds after adjustments sought by the governor broadened the number of Iowans who would get a tax cut — and amounted to a roughly $50 million reduction in the amount of income taxes collected.

“All we need is one person to change their mind,” Murphy says. “…We’re still optimistic we’ll get it done before we adjourn.”

Murphy is counting on Governor Chet Culver, a fellow Democrat, to help find the extra vote that will get the bill passed.

“We still believe that it is a middle class tax cut,” Murphy says. “We still believe it simplifies the tax code and we are optimistic that we will pass it yet this year.”

Murphy may be optimistic, but I’m feeling a sense of deja vu. Two months ago House Democrats were stuck at 50 votes for the “prevailing wage” bill heading into a weekend. The governor and legislative leaders failed to find the 51st vote to pass that measure.

If Murphy’s assessment is correct, two Iowa House Democrats supported the original tax reform bill but not the deal worked out with the governor. Does anyone know who they are, and why they are refusing to get behind the revised tax bill? Do they disagree with changes to the bill, or are they spooked by pressure they are getting from anti-tax conservative activists? It would be a big mistake for the legislature to let this bill die now. Overhauling the tax system won’t become politically easier during an election year.

In other economic policy news, Jason Hancock reports today that prospects look good for three bills which, combined, would approve $700 billion in bonding for infrastructure projects in Iowa. Click here for more details about the bills and what they would pay for. The main difference between this package of bills and Culver’s bonding proposal is that the governor wanted $200 million from bonding to pay for roads and bridges. Legislators have specified that the bonds must be used to fund other kinds of infrastructure projects.

Many Iowa legislators wanted to pass a small gas tax increase this year and next to fund more road projects, but a veto threat from Culver killed that proposal. The federal stimulus package approved this year did include about $358 million in highway funds for Iowa (click that link for more details). I’m with legislators on this one. I’d rather see money raised through bonding used for other kinds of projects.

I am glad to see Democrats move ahead on the bonding bills despite a recent Des Moines Register poll. The poll indicated that just 24 percent supported “Governor Chet Culver’s plan to borrow money to speed up public works projects,” while 71 percent said the state should “pay for the projects as it has the money over time.” That’s a badly-worded poll question if I ever heard one. I’ll bet that people who say we should only take on what we have cash for right now will change their mind once bonding money starts funding projects in their own cities and counties.

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Please call your legislators about the Democratic tax reform plan

The package of tax reform proposals that Iowa Democratic leaders worked out will come up for a vote this week. The Republican Party of Iowa and various right-wing interest groups are generating phone calls and e-mails to the capitol in opposition to this plan, and are planning several protest actions as well.

This package isn’t everything I’d like to see on tax reform, but it would be a huge improvement on the status quo. As State Senator Joe Bolkcom wrote in this op-ed for the Iowa City Press-Citizen,

There is no doubt that lightening the tax burden on Iowa’s middle-class families would be a significant change in direction for Iowa tax policy. It would reverse the trend of tax changes that mostly benefit the wealthiest Iowans. Increases in sales taxes, the reliance on gambling, and the changes in income tax policies have made Iowa’s overall tax system very regressive and unfair. Those who have less pay more. Those with more pay less to support state and local services.

Our proposed reform would reward work and provide tax cuts to middle-class Iowa workers who are bearing the brunt of the national recession.

Iowa Democratic Party chairman Michael Kiernan sent out an action alert on Monday urging Democrats to contact legislators in support of the tax changes. After the jump I’ve posted an excerpt with some details about the plan and other talking points.  

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No time like today to contact your state legislators

The 2009 legislative session is ending soon, and if you haven’t contacted your state representative or senator yet, quit procrastinating. I don’t think legislators diligently read every e-mail when the session gets busy, so I recommend calling them.

Iowa Senate switchboard: 515-281-3371

Iowa House Switchboard: 515-281-3221

I encourage you to tell your state representative and state senator that you support the Iowa Supreme Court’s decision in Varnum v Brien and want them to respect that ruling.

Although I haven’t had time to finish writing a post here about the tax reforms being proposed this year, I support most of what’s in the package, including ending federal deductibility. Right-wing groups are urging Iowans to call their legislators about this issue, so if you support the Democratic tax reform plan, please say so. This article describes the proposed changes to Iowa’s tax code, which Democratic legislative leaders and Governor Culver have agreed on.

Please also mention to members of the Iowa House that you want them to reject SF 432 (here’s why) or remove the Liquid Manure division in SF 432.

If you are speaking with a state senator, especially a Republican senator, please also mention that you want Shearon Elderkin to be confirmed as a member of the Environmental Protection Commission. Culver appointed her to that body last year, and she has been a good vote for the environment.

I happen to know Shearon (pronounced like “Sharon”), because we used to serve on the same non-profit organization’s board of directors. She reads widely on public policy and asks tough questions. She also is a good listener and does not view issues through the prism of partisan politics. Even after serving with her for more than a year, some of our board members did not know whether she was a Republican, Democrat or independent. (For the record, she’s a moderate Republican.)

Feel free to mention any other pending bills or tips for contacting legislators in this thread.

UPDATE: Senator Jack Hatch, who chairs the Senate Health and Human Services Appropriations Subcommittee, says Gene Gessow’s confirmation as director of the Department of Human Services “is in trouble.” I posted Hatch’s speech calling for Gessow to be confirmed after the jump. If your state senator is a Republican, you may want to bring this up as well.

SECOND UPDATE: 1000 Friends of Iowa sent out an action alert regarding Elderkin’s nomination. I’ve posted that after the jump.

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Detailed Republican poll on 2010 governor's race is in the field

The phone rang early Tuesday evening, and the voice on the other end was an interviewer conducting a survey for Hill Research Consultants. I asked who commissioned the survey, but the interviewer said he didn’t know.

Judging from the type of questions and their wording, I assume this poll was commissioned either by a Republican considering a run for governor in 2010, a Republican interest group trying to decide what kind of candidate to support for 2010, or the Republican Party of Iowa itself.

As I always do whenever I am surveyed, I grabbed a something to write with and took as many notes as I could about the questions. However, it was a long poll and there was commotion in the background on my end, so I know I didn’t get all the questions down. If you have been a respondent in the same survey and can fill in some blanks, please post a comment in this thread or e-mail me (desmoinesdem AT yahoo.com).

My notes on the questions asked during this 15-20 minute survey are after the jump. These are paraphrased, but I tried to remember the wording as closely as I could. I don’t know whether the order of the suggested answers was the same for everyone, but since this sounded like a real poll, I assume the order of multiple-choice answers was rotated.

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