Hamerlinck’s Observations Week 13

Though this year’s legislative session may be quickly coming to an end, there has not been a shortage of controversy and excitement during the past few days. It might even be an understatement to say that last week was an eventful and historical week in the State of Iowa. During the past two weeks, we have seen an enormous shift in the social fabric of Iowa with the Iowa Supreme Court’s decision to change the definition of marriage. Then, we witnessed a continued attempt to muffle the voice of taxpayers when 600 Iowans were thrown out of the House of Representatives because they objected to legislation that would dramatically alter Iowa’s fiscal policies, eliminate federal deductibility and raise taxes on hundreds of thousands of Iowa families and employers in absolutely every tax bracket.

The governor and his party allies in the Legislature are busy putting together the finishing touches on a bill that would eliminate federal deductibility and force hundreds of thousands of Iowa families and employers to bear the burden of a huge tax increase. Simply stated, this legislation amounts to a tax on a tax because Iowans would lose their ability to deduct their federal tax liability from their state tax liability.

Because the governor and his allies in the legislature failed to keep spending under control during the last two years, the state faces hundreds of millions of dollars in budget deficits. Instead of cutting up the state’s credit card and tightening the belt like any family or employer would, we continue to look for more taxes to increase, more bonding proposals to add to the state’s debt and more ways to grow the size and scope of an already bloated government. Iowans understand that we cannot spend, we cannot tax and spend and we cannot borrow and spend our way to prosperity and we must instead get serious about enacting real pro-growth policy that will help get the over 80,000 unemployed Iowans back into jobs.

Question #1 for the Iowa Taxpayer: As we head into one of the last days of session, how will the current majority keep spending, yet make their budget balance?

A: The Senate Ways and Means Committee has several possible tax increase bills ready to provide the revenue necessary to increase spending despite the tough economic times. What are some of the bills that could raise an Iowan’s individual taxes this year? Here are just a few examples:

SF 468: Eliminate Federal Deductibility: The bill allows for a tax on a tax. Federal deductibility allows Iowans to deduct all federal income tax payments on their Iowa income tax returns. For many taxpayers, the amount of tax payments made to the federal government is the only – or largest – deduction available to them. Estimates show, in 2009, 69% of the individuals (314,885) whose taxes will increase under the bill make less than $70,000 per year. In tax year 2011, estimates show that the bill will result in a $190 million tax increase on Iowans. If you think the state is entitled to more of your money, then the elimination of federal deductibility is for you.

SSB 1308: City and County Alternative Revenues: The bill is designed to lessen city and county dependence on property taxes. It authorizes a menu of new taxes for cities and counties to implement as an alternative to funding local spending by property taxes. The bill does not reform Iowa’s antiquated property tax system, however. Instead, the bill increases taxes on Iowans in many ways. For example, it is not dollar for dollar property tax relief. If you rent, any offsetting property tax credit the bill provides is worthless. For example, property taxes are deductible on your Iowa income tax return, while your city franchise fees are not.

SSB 1133: IRC Update bill: The bill updates references to the Internal Revenue Code to make federal income tax revisions enacted by Congress applicable for Iowa income tax provisions. The Legislature passes this bill each year because Iowa’s tax provisions based upon federal tax law. This year’s bill would help teachers, flood victims, business owners, parents, and students. The tax benefit to parents and students for the deductibility of college tuition and fees will definitely help families struggling to pay their monthly bills cover the increasing cost of a college education. The bill would provide Iowans a tax cut of $54 million in 2009, $64 million tax cut in 2010, and $33 million in 2011. So, how is the bill a tax increase? The bill will not even be debated, let alone voted on. The lack of your tax cut is revenue to the state for increased spending. The bill also comes with a few hidden surprises. It greatly increases the complexity of the Iowa tax code and forces many Iowans to revisit their tax preparer and pay again to amend their Iowa tax returns.

Iowans are starting to notice a troubling trend. They are losing their opportunity to have a say in the government that is supposed to be of the people and for the people. Last week, the public at a public hearing were removed and their voices were silenced. Next, the current Senate majority refuses to allow the Senate to vote on the marriage amendment and as a result, their voices are silenced. Now three million Iowans are having their voices silenced because they are more interested in the opinions of seven elite judges. Iowans handed the keys of power to Democrats during the last elections, but now the people of Iowa are being locked out of their own government.

The issue that has dominated the discussion in Iowa this week was the Iowa Supreme Court’s decision to allow same-sex marriage in Iowa. In 1998, the legislative and executive branches in Iowa voted to protect traditional marriage by defining it as only between one man and one woman. Last Friday, the judicial branch struck down that law and opened the door to a completely different view of marriage. As it stands now, there is an incongruity between the outcomes of the three branches of government. I believe the ultimate deciders of this important decision should be the people of Iowa. If the branches of government cannot agree, it is always best to allow the voters of Iowa to have the final say.

Unfortunately, Governor Culver and legislative counterparts are obstructing the process that would provide every voting Iowan the chance to decide the marriage question. Just last year, after a taping of the statewide Iowa Public Television program “Iowa Press,” Governor Culver made it crystal clear that he wanted to ‘do whatever it takes to protect marriage as between one man and one woman.’ Regrettably this week, the governor flip-flopped on his promise to Iowans by agreeing with the seven elite justices. His failure to lead likely means three million Iowans will be denied a vote on this important issue.

The Supreme Court justified their ruling by stating married couples enjoy sharing and distributing assets which have monetary value in a manner unwed couples, either same-sex or heterosexual, do not. If the ruling is derived from a monetary stance then it should be fixed by the same. The State of Iowa is in the marriage business as it grants powers of attorney to married partners. This ruling may actually become a prime opportunity to rework problems with the income tax, property tax laws, and powers of attorney over assets and medical care. I am disappointed to see the Supreme Court revert to a discussion about religion in their ruling just to eventually denounce religion in a hypocritical fashion.

I don’t see this issue as being one of Republicans fighting Democrats. In reality, it is an issue which is displayed by shifts in culture through generations. Statistically, those in their twenties are more likely to be open to Civil Unions as long as marriage is still held between a man and a woman. Those in their seventies are more likely to be in favor sustaining marriage in its traditional fashion. Since all three branches of government can’t agree this is even more reason to allow the public to vote.

As I discuss this issue with you my biggest disappointment is in the complete failure by politicians to even take up the issue for discussion. At minimum, those who you elected to office should stand up and hold the debate. I am finding politicians are more than willing to hide behind arbitrary deadlines and funnels just to avoid the topic and leave the Capitol.

The ultimate dilemma is in offering a tax code which is fair to all free taxpaying citizens.