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Legislators hammering out deal on possible commercial property tax reduction

State capitol of Iowa

Rod Boshart, CR Gazette –

ALTOONA – Top state legislators said Tuesday the odds have improved for hammering out a bipartisan plan to reduce commercial property taxes in the 2013 session but they still quibbled over how best to reduce rates without shifting tax burdens to other property classes.

They also gave mixed reviews on how a gas tax increase might fare in the 85th General Assembly with concerns raised over how revenues are divided among urban and rural needs. One GOP leader said a fuel tax hike would have to be within the context of lowering Iowans’ tax burdens overall, while another Republican said “we’re not going to raises taxes on anyone.”

Senate Majority Leader Mike Gronstal, D-Council Bluffs, told the Iowa Taxpayers Association he has “moved from hopeful to confident” that a property tax compromise can be hammered out after Republican Gov. Terry Branstad told the same group one day earlier that he supports an approach whereby the state provides enough money to fully fund local tax credits and to protect local governments against potential revenue losses caused by lowering rates on commercial property and capping increases for homeowners and farmers.

“We were encouraged by the governor’s comments,” Gronstal said. “Obviously details matter in our world, but they seemed consistent with the principles that Democrats have laid out.”

However, House Majority Leader Linda Upmeyer, R-Garner, said she was slightly skeptical given that she had not hear the governor’s comments and given the track record the past two sessions when lawmakers began optimistic only to see negotiations bog down and stall without resolution. She said House Republicans want tax relief to benefit all property owners but do not favor tax credits and targeted approaches that were part of previous debates.

“We want something that is predictable and reliable,” she said.

By the end of the hour-long ITA meeting, Upmeyer said the prospects for reaching a property tax accord next session were pretty good. “If I had to bet, I’d bet in their favor,” she said. “I think it’s better than 50-50.”

Gronstal said he believed the state’s surplus budget and robust revenue growth would enable the governor and Legislature to craft an affordable, phased-in reduction of commercial property tax rates while holding cities and counties harmless from lost revenue and avoiding a cost shift to other property classes.

State Auditor David Vaudt warned against using one-time funds for ongoing expenses, but he said a portion of surplus funds could be used as part of a gradual transition to lower commercial property tax rates that would be offset by increased economic activity accompanying the tax relief.

“I really think we’re going to get something meaningful done that’s a meld between the two (House and Senate) bills and that will not hurt cities. But everyone is going to have to tighten the belt one notch – cities, counties, the state – and we also have to protect home rule,” said Rep. David Jacoby, D-Coralville. He gave two-to-one odds of the Legislature sending a bipartisan property tax reform bill to Branstad’s desk, but he indicated he would like the discussion to include “decoupling” residential and agricultural tax rates under the state’s current rollback formula.

Senate GOP Leader Bill Dix of Shell Rock said the negotiations for a property tax compromise faced “an uphill climb” given the issue’s track record and the fact that the legislative makeup remains unchanged with Democrats controlling the Senate and Republican in charge of the House. “I’m going to side on the unlikelihood that anything significant actually happens,” he said.

Dix said his Senate GOP caucus hasn’t met to discuss 2013 priorities, but he noted a “broader recognition” that critical transportation needs are driving the gas tax debate and any consideration of raising the current fees “would be in the context of lower tax burdens on the people of Iowa overall.”

Upmeyer said House Republicans are interested in cutting state personal and corporate income tax rates but added “we’re not going to raises taxes on anyone.”

Jacoby expressed concern that more than a third of every gas tax dollar collected goes to rural transportation needs during the road-use tax formula. He also did not want the gas tax issue tied together with property tax and income tax changes, calling any bill that tied the three together “dead on arrival.”

The Coralville Democrat said he suspected too many legislators signed pledges not to raise taxes to make a gas tax increase viable and he believed any proposal would need to come from Branstad to have a shot at bipartisan success.

“With some true leadership, the governor can have his own bill in front of us the day we start session,” he said. “Leadership is not — if it comes to my desk, I’ll probably sign it — that doesn’t work for a bill that requires bipartisan support.”

Asked about the prospects for a state gas tax increase during the 2013 session during a meeting with ITA members on Monday, Branstad said the issue has a “long, hard way” to get to his desk.

“I’ve never said that I would veto it,” the governor told ITA members. “It’s a very controversial issue, especially because of the extremely high cost of computing to work for a lot of people. I’m certainly willing to work with the Legislature on that, (but) it’s not something that I’m going to advocate.”

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