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YEPSEN SAYS LEGISLATURE DISAPPOINTS

April 24, 2007

David Yepsen's Des Moines Register column today says the soon-to-end legislative session comes up short. Take taxes:

Tax reform? In 1965, they created tax withholding, repealed outmoded sections of the tax code and raised the gas tax. This one did nothing on a par with that. Iowa's commercial property taxes remain among the highest in the country, our income-tax system remains complicated and uncompetitive.

Mr. Yepsen understates the case. The legislature didn't just neglect Iowa's tax system; they're making it significantly worse.

Iowa's tax system is a rat's nest of high rates made tolerable to the well-connected by complex loopholes. The main tax policy achievement of this session is more loopholes and higher rates, including:

- A new tax credit/subsidy for filmmakers.
- Bigger and better rehab credits, including a giveaway for projects that were already underway anyway.
- A credit for giving away land for conservation.
- A huge increase in the cigarette tax, creating boom times for northern Missouri convenience stores.

The legislature also looks like it will approve a tax amnesty without any corresponding tightening of enforcement or penalties - a short-term fix that helps undermine tax compliance long-term by creating an expectation of future amnesties.

And the legislature is also working to pass combined corporate reporting to increase corporation tax collections. The worst thing that Iowa could do for economic growth is to make our current corporation income tax actually apply to people. Our 12% top rate is the highest in the nation, and the only reason it doesn't stop economic activity altogether is that it's usually easy to avoid.

Any progress - that is, moves to lower rates, broaden the base, and eliminate loopholes - seems unlikely. Resistance to the bad policy of the current session has been feeble, even from those who should know better. It looks like nothing but dark days ahead for Iowa tax policy. Unless, of course, they pass my loophole.

 • Eye on the Legislature: 2007       Bookmark: del.icio.us • Digg • reddit