DES MOINES – Majority House Republicans expanded tax breaks for businesses Monday (Feb. 21) but nixed tax relief the Iowa Senate approved for 240,000 low-income working families.
The House Ways and Means Committee voted 17-7 to “couple” Iowa tax law with the federal tax code to allow small businesses to make equipment purchases and use tax advantages to generate economic activity and job growth. Unlike the Senate, however, they made the bonus depreciation provisions effective for the 2010 tax year to provide immediate benefits rather than delaying their implementation in the 2011 tax year as senators proposed.
Before passing Senate File 209, majority GOP representatives stripped out a provision that would have raised the state’s earned income tax credit for families making less than $45,000 annually from 7 percent to 10 percent retroactive to last Jan. 1. Rep. Tom Sands, R-Wapello, chairman of the House Ways and Means Committee, said that issue may resurface later as the House and Senate discuss overall tax policy changes that also would include the 20 percent across-the-board income tax reduction the House approved earlier this month.
John Gilliland of the Iowa Association of Business & Industry said the move would be an added incentive for companies, especially manufacturers, to make infrastructure investments in Iowa – a move that backers said would stimulate the economy and create good-paying jobs by allowing taxpayers to keep more of their money in their pockets.
However, Rep. David Jacoby, D-Coralville, said the $14.7 million in relief that would be generated by raising the earned income tax credit would put money flowing back into the economy faster than the business tax breaks that would result in $103.4 million in tax reductions in the state’s current fiscal year and $179.4 million next fiscal year. By contrast, the Senate approach provided $44.7 million in tax relief in fiscal 2011 and $152.1 million the following fiscal year.
“This coupling is extremely important to us to get it moving on,” Sands said.
S.F. 209 also included nearly $46 million in supplemental spending for the current fiscal year – including nearly $6 million in restored funding to Iowa’s 15 community colleges that was not included in Branstad’s budget recommendations. The proposed spending increases of $18.5 million for indigent defense, $2.6 million for mental health institutions, nearly $3 million for public safety and nearly $10 million for corrections were included in the governor’s recommendations.
The House Ways and Means Committee did not address those supplemental spending provisions, which will be referred to the House Appropriations Committee for consideration before the bill is debated by the full House and returned to the Senate.

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