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THE TAX AGENDA IN IOWA'S UPCOMING LEGISLATIVE SESSION

November 28, 2006

David Yepsen discusses the incoming Iowa Senate Majority Leader Mike Gronstal's agenda in today's Des Moines Register. The column is based on Mr. Gronstal's comments in a recent recording of Iowa Press for IPTV.

Given the pent-up demand for spending programs after the Democrats' many years in the legislative wilderness, tax increases seem likely. Mr. Yepsen's column addresses them in the order I think they are likely to pass. From the column:

- Cigarette taxes. An increase will be considered as a public-health measure to discourage teen smoking, but it's a "tossup" whether it will pass.

I think it will pass sooner than a fidgety smoker can light up on the way out of a smoke-free restaurant.

- Gas tax. An increase is "possible" to pay for more road work.

And it's "possible" that I will use my computer today.

- Tax reform. Some Democrats want to eliminate the ability of Iowans to deduct the federal income taxes they pay before calculating their state income-tax bills - then lower tax rates. It would make Iowa's tax system simpler, more progressive and more competitive for executives looking to locate here.

Doing that "remains to be seen," he said, because many Republicans hate the idea. "If we can't find some common ground with Republicans on tax reform in this state, I don't have a lot of interest in shoving some solutions down people's throats."

Mr. Yepsen is way too optimistic if he thinks the tax system will be "simpler." Governor-elect Culver is all about "targeted" tax breaks, which always add complexity. If federal deductibility is eliminated, the rates will be lowered, but probably not enough keep the package from being a tax increase overall. They'll want the money.

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