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Statehouse Republicans reach agreement on tax cuts, mental health funding
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Statehouse Republicans reach agreement on tax cuts, mental health funding

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DES MOINES — A significant overhaul of state tax policy and mental health funding is in the works, as Republicans in control of the state lawmaking process appear to have finally reached agreement on myriad funding streams and policies.

The agreement that has proved elusive for weeks at the Iowa Capitol surfaced late Monday, when Republicans announced a compromise that signals the end of the 2021 legislative session is near.

Under the bill, according to the many and significant provisions in the sweeping piece of legislation:

  •  Triggers that in 2018 were created to ensure a certain level of state revenue growth before state income tax cuts could be enacted would be removed. Removal of the triggers would ensure the tax cuts go into effect in 2023.
  • The income threshold for eligibility for the state child care tax credits would double from families making $45,000 annually to $90,000.
  • The state’s inheritance tax would be phased out over five years.
  • Funding for mental health care services would be shifted from local property tax revenue to the state’s general fund, and funding would be equal for services whether provided in-person or virtually.
  • The state’s backfill of local tax revenue would be phased out.
  • COVID-19 grant money and federal pandemic relief loans to businesses would be exempt from state income tax.

Despite unified control of state government, Iowa Republicans in the House, Senate and governor’s office spent weeks negotiating some of those provisions.

“Because of the disciplined budgeting practices of Iowa House Republicans over the last decade, Iowa is in a strong fiscal position to further reduce the tax burden on Iowans,” Iowa House Speaker Pat Grassley, R-New Hartford, said in a statement. “I’m proud of the role House Republicans played in making this bill the best possible outcome for Iowans.”

The Senate moved quickly, debating and passing the sweeping legislation on Monday evening, mere hours after it was introduced.

Senate File 619 passed the Senate on a 29-17 vote with Democrats Tony Bisignano and Kevin Kinney joining all Republicans in support of the measure. It now moves to the House for consideration there.

“Not only is this something big and something bold, this is something we can take back to our constituents and say we did something fair, something right, something good,” Sen. Dan Dawson, R-Council Bluffs said during debate.

Democrats in the Senate said they support many measures in the bill, but they argued for keeping the backfill funding to local governments. They argued by eliminating that funding from the state, local governments will be forced to raise property taxes or reduce services in order to maintain their budgets, either way placing the burden on Iowa taxpayers.

“You (Senate Republicans) are voting to raise property taxes across our state. It’s that simple,” Sen. Zach Wahls, D-Coralville, said during debate.

Dawson argued that local revenue growth since the backfill was created, plus recent federal pandemic relief funding for cities and counties, should enable local governments to keep their budgets whole while the backfill is phased out.

Earlier Monday, Democrats on the House budget committee gave “conditional” support to House File 893, the House version of the compromise. Rep. Chris Hall, D-Sioux City, said there are parts of the bill “that give my members pause” as well as other pieces they have supported, such as child care measures and telehealth parity.

Democrats’ support was based, in part, on their hope the Senate didn’t make major changes.

“At this point in the session,” Ways and Means Chairman Gary Mohr, R-Bettendorf, said, “I can’t take that to the bank.”

-- James Lynch of the Gazette in Cedar Rapids contributed.

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