Statehouse Democrats are working to beef up a tax credit for the working poor to offset the proposed increase in the state’s cigarette tax. Critics of the tax have said it would fall hardest on poor people, who are more likely to be smokers and least able to bear the dollar-a-pack increase the governor’s proposing.
Currently more than 100,000 Iowans qualify for a low-income tax credit on their state and federal returns. The federal credit is refundable but the state credit is not. The chair of the Senate tax writing committee, Joe Bolkcom, an Iowa City Democrat, says it should be especially as the state considers raising a regressive tax like the one on cigarettes.
The federal Earned Income Tax Credit has been very successful, Bolkom says, at putting thousands of dollars into the pockets of low-income working families. He says when they file their taxes, it "provides a real boost," so backers of the change are working to make the tax credit refundable and help working families. While it could mean a refund of a couple hundred dollars to individual taxpayers, it would cost the state up to fifteen-Million in lost revenue.
But businessman Doug Struyk of Council Bluffs, a key House Republican, says it’s a "wise investment" that will do more to help the working poor than the recent increase in the minimum wage. Bolkom says even with all the tax-cutting of recent years, little of it has benefited low-income working families. He says this is a targeted effort to help them.