Lawmakers aren’t exactly embracing Governor Chet Culver’s call for a change in business taxes that officials estimate might bring up to 75-million more tax dollars into state coffers. House Majority Leader Kevin McCarthy of Des Moines who, like Culver, is a Democrat, doesn’t give the proposal much chance of becoming law.
"I sense some support, but not critical mass to get it passed at this point," McCarthy says. Former Governor Tom Vilsack tried in three separate years but failed to get lawmakers to make the change and McCarthy isn’t laying good odds that Democrats will line up with Culver this year.
"It’s probably a pretty heavy lift, to be frank with you," McCarthy says. Senate Republican Leader Ron Wieck of Sioux City opposes the idea of changing corporate tax law to close what Governor Culver describes as a loophole.
"We’re going to drive business right out of the state out of Iowa and we’re going to definitely affect our opportunities to bring new business to Iowa," Wieck says. "…This would just be one more nail in the coffin as far as I’m concerned." John Gilliland of the Iowa Association of Business and Industry says the change would have a significant financial impact on some "good Iowa employers."
"And it would seriously curtail their future investment in Iowa," he says. Governor Culver argues 21 other states have made the change, which bars companies from recording business transactions in another state which has lower corporate taxes. Culver also says the neighboring states of Nebraska, Illinois, Minnesota, Kansas and North Dakota have already closed the loophole he seeks to close here in Iowa.
Gilliland, who’s with the Iowa Association of Business and Industry, says while advocates of the change are trying to ensure "big box" stores like Wal-Mart and Best Buy pay their fair share of corporate taxes in Iowa, the change would harm some key Iowa icons.
"The reality is it does impact major employers in this state like Deere, like Cargill, like Hormel, like Lennox," Gilliland says. "You know, those are staples in Iowa’s economy and we want them to continue and invest and employ people in Iowa so we need to be very careful about pursuing these types of policies." But Democrats hold a majority of seats in the Iowa House and Senate and get to decide the debate agenda.
Senate Democratic Leader Mike Gronstal of Council Bluffs says Culver’s idea isn’t his "favorite" option, but Gronstal’s not immediately rejecting the governor’s proposal. "It has winners and losers. It has winners and losers inside Iowa’s borders," Gronstal says. "I mean there are challenges to that and we need to take a look at those, figure out what’s there and make a decision as to whether we’re going to proceed in that direction or not."