August 1, 2014

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 iowa.gov/tax 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.

Branstad says 2010 promise was to cut size of gov’t, not size of budget

Governor Branstad says he’s keeping his 2010 campaign promise to shrink the size of state government and reduce the number of state employees, but a new report shows there’s been an increase in the number of full-time workers on the state payroll during Branstad’s current term as governor.

“Governor Branstad has a problem in trying to reconcile all of the promises he’s made to what’s real,” says Jack Hatch, the Democrat who is running against Branstad.

A document from the Legislative Services Agency shows the number of state employees grew by 3500 during the first two years of Branstad’s current term. Branstad says he’s cut the workforce in the executive branch by over a thousand during the past three years, but Branstad says he cannot control hiring decisions in the other branches of state government OR at the three state universities. Almost 3900 new employees were hired at Iowa, Iowa State and U-N-I during the first two years of Branstad’s current term, but Hatch says those hires were Branstad’s to oversee.

“It’s an inadequate response when the governor of this state, the CEO of our state government, blames other people for his inability to manage the state,” Hatch says. “He appoints the Regents. He has significiant influence over the growth of this state budget.”

The size of the state budget has grown by half a billion dollars over the past two years, but Branstad says he never promised to cut overall state spending by 15 percent.

“What we’ve done, and I want to point this out. we’ve reduced the size and cost of state government and redirected more of the money to education and to property tax relief,” Branstad says.

Branstad says he believes that’s the expectation voters had back in 2010 when he was reelected to a fifth term.

“I think they wanted us to reduce the size and cost of state government, not cut education and not raise taxes,” Branstad says, “and we did exactly what we promised to the voters.”

As for the other two branches of state government, the number of employees in the legislative branch has declined by six percent over the past five years. The state’s court system saw a 17 percent reduction in staff over a 10 year period, but during the first two years of Branstad’s current term 23 more employees were hired in the judicial branch of state government.

Several factors make Iowa a draw for data centers

Iowa has become home to data centers or server farms for some of the biggest players in the tech industry. Why do companies like Google, Facebook and Microsoft choose a state in the middle of the country to store their data?

John Roth is a data center facilities manager for OneNeck IT Solutions in Cedar Falls says one advantage of securing data in Iowa is you don’t have to worry about earthquakes, hurricanes and other natural disasters. “You want to build where you can avoid that and have your facility maintain its up time. If you look at maps, Iowa has very low risk,” Roth says. He says tornadoes are about the only thing you have to worry about and you can build to mitigate that risk.

There are now large data facilities in operation or under construction in Council Bluffs, Altoona and West Des Moines. Iowa State University economist Dave Swenson says Iowa’s cheap energy prices are a major draw for the facilities. “These companies consume an unbelievable amount of electricity. They’re monsters. They eat electrify. That’s how they run, they require massive amounts of power,” Swenson says.

Iowa Economic Development Authority director, Debi Durham, says Iowa’s cheap electricity is due in part to the fact the state doesn’t apply sales taxes to the utility. Additionally, she says Iowa electric companies keep costs low with the investment in new renewable energy, and the diversity of their portfolios. “And then you have really strong investor owned utilities here, and then you couple those with the rural electric coops with are also strong in economic development, and then the third player is the municipalities, and then to be very competitive themselves,” Durham says.

ISU economist Swenson says Iowa’s attractive tax incentives sealed the deal for the companies locating the operations here. “Iowa is much more liberal in its range of state and local government incentives that it affords businesses,”Swenson says. “Other states, usually, usually are much more circumspect both in the amounts, the duration, the scope and the type.” Swenson says it’s doubtful whether places like Altoona and West Des Moines get back what they give up in property taxes.

However, Debi Durham says the state isn’t going into these agreements blindly. She insists Iowa will get the jobs Google, Facebook and Microsoft promise. “We actually hold all of our clients accountable –so there’s a day of reckoning down the road. And if they don’t meet those numbers then we exercise claw-backs. Which means you have to pay back incentives, or you don’t get to take, if you haven’t taken them,”Durham says.

When Microsoft announced West Des Moines as the site of its newest datacenter, many in the company’s home state of Washington were not pleased. Some speculated Iowa’s generous tax incentives tipped the scales, despite several logistical advantages of being in the center of the country. Both Microsoft and Facebook declined to be interviewed for this story.

By Sarah Boden Iowa Public Radio

 

State fiscal year concludes with tax receipts $185 million below expectations

State tax receipts in June were “flat” according to the latest information from the Legislative Services Agency. June was the final month of the state fiscal year and Jeff Robinson, a tax analyst for the Legislative Service Agency, says state tax collections for the past 12 months were $185 million below the official estimate.

“We have had plenty of time to plan for it and we had excess revenue above expenditures for this particular fiscal year,” Robinson says, “so while not a good thing, it’s not as it might be in a different fiscal year.”

Robinson says it’s too early to calculate how much money was left unspent in the state’s 12-month-long budgeting year. The accounts won’t officially be closed until September.

Personal income tax payments to the state were down 2.7 percent over the past 12 months. Robinson says that’s mainly because of federal tax law changes.

“It’s not a great year for personal income, but it’s not a bad year, once you adjust for that,” Robinson says.

Farm income is down this year compared to last as well.

“And you can see that when farm tax returns were filed, this was not as good a year,” Robinson says.

Sales and use tax payments to the State of Iowa were up $97 million for the fiscal year. State receipts surpassed $6.6 billion for the past 12 months.