Dan Dawson. (Legislature photo)
The chairman of the Iowa Senate’s tax-writing committee says he’s drafting a five-year plan to dramatically cut state income taxes for individuals and corporations. Republican Senator Dan Dawson of Council Bluffs says the $1 billion sitting in the state’s Taxpayer Relief Fund is just the start.
“We have an opportunity to do a tax moon shot this next year,” Dawson says. “…There’s no reason we should settle for mediocrity.”
Dawson is aiming for a reduction in personal income tax rates along with eliminating or reducing some of the long list of state tax credits — to reach the other goal of cutting the corporate income tax rate as well.
“I will say right now I have no interest in lowering corporate rates without substantially reforming some of our incentives and credits,” Dawson says, “because if we don’t change the back end of the system then all we are is just making the winners more winners and making the losers not as much of losers.”
Dawson says he’s not talking about blowing up the whole tax credit system for businesses. “It doesn’t mean just throwing everything in the trash can, right? There’s obviously different metrics that affect everyone’s individual bottom line,” Dawson says, “but if we work together…the legislature with the corporate entities here in Iowa, we really can reform this and make it a better system.”
But Dawson says he’s prepared to abandon the idea of reducing corporate income taxes if there’s major pushback to changes in tax credits. Representative Lee Hein, a Republican from Monticello, is chairman of the House Ways and Means Committee. He says Republicans in the House are focused on reducing taxes for individuals.
“There’s a multitude of ways to do that, whether it’s cutting rates, property tax relief,” Hein says. “It could be as easy as cutting a check.”
Representative Dave Jacoby, a Democrat from Coralville, says he wouldn’t be shocked if Republicans decide to mail Iowans a tax refund check in an election year. Jacoby says when it comes to business taxes, tax credits must be reduced or eliminated before the corporate income tax rate is lowered.
“I’m for lowering the rates,” Jacoby says. “I’m also for everyone paying them.”
Senator Pam Jochum, a Democrat from Dubuque, says the projection is that Iowa will provide more than half a billion dollars in tax credits this next year.
“Is this just one more big giveaway to some very large, profitable corporations? And I say that ’cause we have some really large corporations — we love them dearly here — they pay zero corporate income tax in this state,” Jochum says. “In fact, we are writing them out checks.”
That’s because the state’s research and development tax credit for some businesses sometimes larger than what they owe in corporate income taxes, so the state sends those businesses a tax refund.
The four lawmakers made their comments during a recent forum sponsored by the Iowa Taxpayers Association.