DES MOINES | He never thought it would be easy, but Iowa House Appropriations Committee Chairman Pat Grassley is learning just how difficult it can be to overhaul tax credits.
The New Hartford Republican set the ambitious goal of overhauling the state’s tax credit system that includes $427 million for everything from adoption to wind energy. On Thursday, he acknowledged he may have to reform the system of credits available to Iowa businesses, industries and individuals in small bites.
“I still believe it should be the goal of the Legislature to have a cap on tax credits,” Grassley told an Appropriations subcommittee looking at House Study Bill 187 “I don’t see any reason why when Legislature walks into this building we don’t know the amount of money that is spent each year on tax credits. I think it is a little bit silly we don’t have that number.”
Rather than pushing for a cap on tax credits, Grassley plans to look at the individual credits to determine whether they should be capped, adjusted or eliminated. Refundable and transferable credits will be on the agenda, he said, adding the Earned Income Tax Credit, designed to provide tax relief for low- and middle-income working families, and the 260E credit for community college retraining programs won’t be part of the overhaul.
That’s a “smart move,” said Rep. Chris Hall of Sioux City, the ranking Democrat on Appropriations.
“Both of those programs are very effective at what they do,” he said. The Earned Income Tax Credit, “makes a difference in what they have available to them and has proved to be of the most effective programs to getting people to work and also providing something that hopefully helps them.”
He said community colleges, the business community and economic developers like the 260E credit because “it gives them a great degree of flexibility and ... it really works well.”
Democrats, Hall said, welcome a discussion on tax credits. It is an acknowledgment of what they’ve been saying about tax credits “growing exponentially over the past few years (and are) unsustainable compared to the growth of the state economy and revenues.”
However, Hall warned that Democrats are interested only so long as the end goal is “making the budget work better for working families.”
Some tax credits are growing in ways that are “taking tax dollars from normal working people and sending them out of state. That’s not something that most people would agree is smart budgeting,” Hall said.
Grassley hopes to get committee approval of HSB 187 next week and hasn’t given up bringing it to the House floor before the Legislature adjourns, perhaps later this month.