September 20, 2014

Branstad calls state fuel tax ‘old fashioned’, considering sales tax on fuel instead

Governor Terry Branstad says he’s open to continued discussions about how to find new funding sources for road and bridge construction in Iowa, including the idea of imposing the state sales tax on fuel.

“That kind of an approach is an approach that has been used now recently by a number of other states and its one that would be more of a permanent solution,” Branstad says.

Charging the six-percent state sales tax on fuel sales would add far more to the cost of filling up the tank than just raising the state gas tax by 10 cents a gallon. For example, someone buying 10 gallons of gas would pay $1 more if the state gas tax went up a dime. But, if the state sales tax were charged on that transaction, the consumer would pay $2 more.

“Anything you do, obviously, the users are going to have to pay for it,” Branstad says.

The state fuel tax hasn’t been hiked since 1989, when gas was selling for less than $2 a gallon. The average price today in Iowa is $3.37 a gallon. Branstad says charging the state sales tax on fuel purchases would keep up with inflation.

“Going away from the old-fashioned gas and diesel fuel tax, to me, makes sense,” Branstad says.

But the governor is not calling on legislators to pass a bill that would make the change. Branstad has repeatedly said he’s waiting for a “bipartisan consensus” to develop in the legislature. According to Iowa DOT estimates released a couple of years ago, the state is at least $215 million short of what’s needed to maintain and expand the state’s transportation network.

Branstad made his latest comments on the subject yesterday, during his weekly news conference. Find the audio here.

Branstad and Hatch continue discussion on tax breaks

Governor Terry Branstad.

Governor Terry Branstad.

The two candidates for governor continued their back and forth over tax breaks today. Republican Governor Terry Branstad was asked about the criticism of the state’s tax deal with a fertilizer company by Democratic challenger Jack Hatch.

Branstad says Hatch, a state senator and real estate developer, is being critical of the deal while at the same time refusing to release his income tax information. “I think Iowans have a right to know that information, and I think it’s interesting that with only investing 12-hundred dollars he has made seven million,” Branstad says. “And that while he rails against tax credits that have created jobs in southeast Iowa, he has made millions in tax credits.”

Branstad says he has released 24 years of his own tax returns, while Hatch’s campaign released one year and had promised to release four more. “But then when Senator Hatch found out about it he said ‘No’ and he refuses to this day. I think Iowans deserve to know how much money that he made and how much taxes he paid and the kind of tax credits he was able to get,” Branstad says.

Branstad says Hatch and his fellow Democrats in the Senate have wrongly attacked his economic development director Debbie Durham over the deal. “So Jack Hatch thinks he is a better professional developer than Debbie Durham and that he is better the count officials in Lee County,” Branstad days. “I submit that Debbie Durham — who has a tremendous track record of being a tremendous economic developer in Sioux City and now for the state of Iowa – has helped grow the economy, reduced the unemployment rate in the state by about 30-percent, brought all kinds of good jobs to all parts of the state, knows a lot more about this than Jack Hatch. “This has broad-based bipartisan support in southeast Iowa. Maybe Democrats in the Senate don’t think it is important, but the people who live there and the farmers of Iowa think this is, and it’s making a difference. It makes more sense to have nitrogen fertilizer produced in Iowa than overseas,” Branstad says.

Jack Hatch.

Jack Hatch.

Hatch held a meeting with reporters shortly after Branstad’s weekly news conference. Hatch says Branstad and the Republican Governors Association have been trying to make a political issue out of his business practices.

But Hatch says a review by the Des Moines Register shows he has done everything right when it comes to getting tax credits while working the Iowa Senate. “And they are then just trying to intentionally to provide a false and misleading profile of me to that is contrary to what we all believe is required or should be tolerated in a Democratic election,” Hatch says.

Hatch says it has been a precedent to release just one year of tax returns once you announce you are running for governor. He was asked why he is against releasing more tax returns. “Well I think you’ve seen what happens with full disclosure of my business and they still are going to be attacking, making false statements,” Hatch says. “Why would I want to give them more? That’s just going to give them another wave of attacks that are false and misleading and incomplete. And that’s why we are not going to do it.”

Hatch says releasing his tax returns won’t stop the Republican attacks on his use of tax credits. “Why give a robber a combination to another safe and you really think he’s not going to take any money?,” Hatch asks. Hatch also addressed the governor’s claim that Hatch and fellow Democrats are against the economic development brought to southeast Iowa with the new fertilizer plant. “The issue with Orascom has never been about whether we should have a fertilizer plant. It was always about the negotiated agreement that governor Branstad and his team put together. And that has always been the issue,” Hatch says. “And I think they went way over the top and gave them an unbelievable deal and really gave them too much.”

Hatch says he is a better negotiator than the governor’s economic development director and would not have given Orascom such a good deal to build the fertilizer plant. The two will get to talk more about the issue at their next debate which is scheduled for Burlington on September 15th. Governor Branstad says he specifically chose the southeast Iowa location for the debate because of the discussion over the deal for the fertilizer plant in the area.


Grassley says U.S. tax system the reason companies consider overseas headquarters

While some critics blast Walgreens for considering a plan to move its headquarters overseas to save billions of dollars in U.S. taxes, Iowa Senator Chuck Grassley says it’s America’s tax system that’s “unpatriotic.”

While the Illinois-based drug store chain reportedly will abandon plans to base itself in Switzerland, Grassley says he doesn’t want corporations to leave this country, but he can’t blame them for doing so. “I don’t like companies doing this,” Grassley says. “I like to have them think of the United States coming first, but we have tax laws that make them uncompetitive with international competition. At 35%, our tax rate is the highest of any industrialized nation in the world.”

The average corporate tax rate of all of the other industrialized countries is 20 to 25-percent, Grassley says, which means U-S-based companies have a very hard time competing in the global marketplace. Grassley says, “It ought to be seen as unpatriotic for us to have a tax system at 35% that’s different than any other tax system in rest of the world where we’re shipping jobs overseas and even encouraging our capital (to) go overseas.” A former chairman of the Senate Finance Committee, Grassley says U.S. corporations are storing one-and-a-half to 2 trillion dollars in offshore accounts, money that could be used for “economic good” in the U.S.

“We ought to have a tax system that encourages companies to locate here and bring capital in and to be internationally competitive,” according to Grassley. Walgreens, the nation’s largest drug store chain, has 69 stores in 35 Iowa cities and more than 8,200 stores nationwide.


Annual Sales Tax Holiday starts Friday

Anyone who needs to do back-to-school shopping for clothes and shoes will save money if they go this Friday or Saturday, thanks to Iowa’s annual Sales Tax Holiday. Kay Arvidson, spokeswoman for the Iowa Department of Revenue, explains how the 15th annual tax holiday works.

“It begins at the stroke of midnight Friday and runs until midnight on Saturday,” Arvidson says. “It’s always the first Friday and Saturday of August. People can make purchases of clothing and footwear and they do not have to pay sales tax or local option tax on those purchases.”

She says there are a few stipulations about buying items free from taxes during the two-day event. Arvidson says, “This relates to items that cost less than $100 and there is a detailed list on our website at that gives you some ideas about the items that are and are not taxable.” She offers a few examples of items in the gray area that may confuse shoppers. “Jewelry is taxable but certain items of clothing like bowties or blouses or boots, bowling shirts, uniforms, those sorts of things are not taxable,” she explains.

In 2012, retailers statewide reported nearly $15 million in sales during the tax holiday. When multiplied by the 6 percent tax rate, that’s a savings to consumers of about $887,000.

By Pat Powers, KQWC, Webster City



Iowa tax climate ranks low, 40th out of 50 states

Iowa’s tax climate ranks among the worst in the nation according to a new report released by the “Future of Iowa Foundation.” The group is a subsidiary of the Iowa Taxpayers Association and its report ranks Iowa’s overall tax system 40th out of the 50 states.

Iowa Taxpayers Association president Dustin Blythe says members of his organization will meet August 19 to start a conversation about how to improve that ranking.

“Trying to come up with a broad-based tax reform agenda,” Blythe says.

One reaon Iowa’s overall tax system ranks so low is because the state’s sales tax is so high. A two percent sales tax was first imposed in Iowa in 1934. It has tripled since then, to six percent.

“What we actually have subject to tax from what we had subject to tax in 1970 to now has almost gone from 70 percent down to 30,” Blythe says, “which means your sales tax rate has to go up if you’re taxing (fewer and fewer) items.”

The group’s report also says the tax has to go up because there are fewer people in Iowa — a net loss of more than 60,000 people over the last 20 years. In addition, Iowa has the nation’s highest corporate income tax and the state’s top personal income tax rate is nearly nine percent.

“Obviously the high rates, at least on paper, give us the appearance that we’re uncompetitve on a national scale,” Blythe says.

Iowans are able to deduct their federal income tax bill from their income before calculating how much they owe in state income taxes. It makes Iowa’s income taxes appear far higher. Republicans, though, have resisted efforts to get rid of that deduction, which is only allowed in five other states, arging it would be a tax on a tax. Blythe says his group is open to the idea of getting rid of that deduction, but only if the move is part of “comprehensive” reform of the state’s entire tax system.

Job fair in Davenport Thursday for retiring soldiers

Home-baseOver three dozen companies plan to participate in an event in Davenport this Thursday aimed at connecting veterans with job openings in Iowa. It’s part of the state’s “Home Base Iowa” initiative and Governor Terry Branstad plans to be there for the job fair.

“Last November I announced the new program, including an incentive package for veterans, that would help recruit veterans to work in Iowa after they complete their military service,” Branstad says.

So far 86 veterans have contacted the State of Iowa through the Home Base Iowa website and officials say 23 veterans have gotten jobs through the program. Branstad signed legislation on Memorial Day that erases state income taxes on military pensions and allows veterans and their families to pay in-state tuition if they go to an Iowa college or university. Howard County and Greene County have offered additional local incentives for veterans and have been declared “Home Base Iowa” communities. To earn the designation, an area must get at least 10 percent of the area’s businesses to agree to hire veterans.

“Scranton Manufacturing is located in Greene County,” Branstad says. “They have already hired a veteran throught the Home Base Iowa program and they have interviewed several additional veterans.”

Twenty-nine other cities and counties are completing the paperwork in hopes of being declared “Home Base Iowa” communities as well. Branstad says national publications for the Veterans of Foreign Wars and the American Legion have listed the new benefits available in Iowa for soldiers who are leaving the military.

Survey finds 67 percent of Iowans oppose paying sales tax on internet purchases

The National Taxpayers Union and a D.C.-based think-tank are touting a new survey which finds a majority of Iowans are opposed to paying sales taxes on internet purchases.

A Gallup poll last year found 57 percent of Americans were opposed to internet sales taxes and the groups’ survey, which was conducted in Iowa this past May, found 67 percent of Iowans were opposed to the concept.

Andrew Moyland of the R Street Institute was at the Iowa capitol today to discuss the survey with legislative staff and representatives from Iowa business groups. Moyland suggested candidates for all offices should be wary of allowing states to collect internet sales taxes, including prospective presidential candidates like Ted Cruz, Mike Lee and Marco Rubio who’ve been campaigning in Iowa. There may soon be a vote in the U.S. Senate on a bill that would give states greater authority to collect sales taxes on internet sales.

“This is definitely coming to a head now and I think that folks who are supporters of this would like to get this done as soon as possible because even supporters don’t want to be on record supporting an internet sales tax bill so close to an election,” Moyland said during an interview with Radio Iowa.

Moyland praised Chuck Grassley, Iowa’s Republican senator, for opposing what’s called The Marketplace Fairness Act that would give states broader authority to collect sales taxes on internet purchases. Others who support the legislation say Main Street businesses see more and more people who come in, look over the merchandise, then go online to make the purchase — escaping the sales taxes they’d pay if they bought the product in the store. Moyland rejected that argument.

“There are 46 different states with sales taxes and 9,998 different taxing jurisdictions across the country,” Moyland said, “and so if you’re asking online retailers to have to jump through all those hoops when brick-and-mortar retailers are just jumping through one where they’re physically located, I think that’s the opposite of a level playing field.”

According to a University of Tennesse estimate, $88 million in sales taxes that were legally due to the State of Iowa were NOT collected on internet purchases made in 2012. Moyland argued that “pales in comparison” to the sales taxes the State of Iowa fails to collect because the state sales tax is not charged on all services. For example, boat repair services are not subject to the Iowa sales tax and, ironically, the state sales tax is not charged to any “on-line computer service” operating in Iowa. Here’s the comprehensive list of state sales tax exemptions for both goods and services.