BY CHUCK VANDENBERG
FORT MADISON – A winter storm that swept through most of Iowa on Friday wasn’t enough to stop Lee County’s three area elected officials from stopping in for some questions at River Rocks Bar and Grill.
The first monthly Legislative Luncheon of 2020 sponsored by the Fort Madison Chamber of Commerce kicked off with a recap of the governor’s Condition of the State address, where Governor Reynolds pushed for a reduction in property taxes in favor of additional sales tax revenues, including a 1 cent hike in the local option sales tax.
State Representatives Jeff Kurtz (D-Fort Madison) and Joe Mitchell (R-Wayland), and State Sen. Rich Taylor (D-Mt. Pleasant) fielded questions moderated by Tim Gobble, executive director of Fort Madison Partners.
Jeff Kurtz said the proposed shift to sales tax in lieu of property tax is disingenuous to the middle class and working poor.
“A sales tax is the most regressive tax we can have. It disproportionately affects poor people, especially the working poor. And it’s not like people aren’t working here, they just aren’t making enough money,” he said.
“To add the extra burden of another penny in sales tax on them while we’re going to reduce the top bracket to down to 5.5% is unconscionable. I think it’s gonna cause a lot of problems we don’t see right now.”
State Sen. Rich Taylor agreed the move equates to a tax on poor people.
“By 2023 she’s going to cut the top earners’ tax by 3.5%. So basically all this is going to do is put a tax on the poor people, who can already barely afford to live,” Taylor said.
“We’re not going to gain a thing out of this, in my opinion. If we keep the formula the same and not give big tax breaks to the richest people that don’t need them, I’d be very much in favor of this.”
Kurtz said the democratic caucus figured 1/8 of a cent in sales tax equates to $63 million. So the bump would generate $500 million in additional sales tax, which the governor would offset out of property tax to make it revenue neutral.
State Rep. Joe Mitchell arrived late to the lunch battling road conditions in southeast Iowa.
Fort Madison councilman Bob Morawitz asked the three to clarify the governor’s reduction in property taxes in lieu of increased sales tax.
“Countywise and citywise, we really count on that money to come in. We don’t have too many other funding sources,” Morawitz said.
Kurtz said the caucus didn’t get a whole lot of guidance on the funding, but said he’s hearing it’s supposed to be revenue neutral.
Taylor said the governor proposed funding state mental health care from the state’s general fund to take the burden off county government.
“It’s a great idea, but I’m not sure how she’s gonna pay for that with all the other things she wants to do,” Taylor said.
Mitchell said the penny sales tax increase, would send 3/8 to water quality and the remaining 5/8 would go to fully fund mental health at the state level.
“That means we would take the levies away and the property tax away that you guys pay right now for mental health on the county level,” he said.
“I haven’t seen details on how we’re going to make that work, but the biggest thing is if the state’s going to take control of its funding, then we need to take control of the system and make sure it’s better than it is right now.”
He said it’s also important that the state make sure the regions know what the expectations are.
Gobble then asked about a loophole in the state’s hotel/motel laws that allows for sales tax to be exempt on stays longer than 30 days in the state’s hotels and motels.
Gobble said Lee County was 13th in the state with an exempt sales tax of $1.1 million, exempt general fund revenue of $56,000, and exempt local revenue of $78,000.
Kurtz said he was on Ways and Means when that bill went through and said there wasn’t any controversy in the bill whatsoever.
“I tried to find out something about this before I left, but I will keep looking into it,” Kurtz said.
Taylor said there are a lot of extended stays in larger cities so he was surprised to see Lee County in there because the other counties are anchored by a really big city. He said the figures may have come from when the fertilizer plant was under construction.
One question focused on the age to purchase tobacco products in Iowa, with the federal government setting the age at 21. Local law enforcement has indicated they won’t enforce the law until it becomes a state law.
Mitchell said his stance has always been that if you can be drafted, or vote, or be the mayor of Fort Madison, you should be able to purchase tobacco and vaping products.
‘I don’t know how much of an appetite the legislature will have on it this year, but that’s been my stand on it.” he said.
Kurtz said the problem with not raising it that he could see is insurance rates going up because of the health problems associated with tobacco and now vaping. But said he would have to hear a lot more to consider not raising the age.
“The more we can keep from tobacco and vaping the better off we are,” Kurtz said.
Taylor said he’s more in line with Mitchell, but he said he didn’t care of it’s 18 or 21 for everything, but if you can’t smoke or drink, you shouldn’t be able to be drafted or go to prison as an adult until you’re 21.
Gobble also asked the three if there was any additional information regarding the collection of online sales tax and that revenue data stream.
Taylor said he wasn’t sure how the state was collecting the online sales tax.
“We don’t have a handle on where its coming from. They send us so much money and we take it. There’s absolutely no requirements for them to prove what they’ve collected in the name of Iowa, or to share where that money came from,” Taylor said.
He said it all goes into one big basket and is distributed like the local option sales tax.
Kurtz said he was in a budget subcommittee meeting on Thursday and went through revenue lines, but said he agreed with Taylor that was a separate line that showed revenue from online companies.
Mitchell said there has been an increase in revenue to the state from that tax put in place a few years ago, but he said his understanding is that the state has no power to enforce the payments or report it due to federal law.
“Right now they’re voluntarily doing that tax, and if there’s someway to make sure that Amazon or Wal-Mart is paying their fair share, I’m all for that,” he said.
Lee County Auditor Denise Fraise asked what legislators are looking at to help ambulance services and reimbursement rates to keep service providers viable.
Mitchell said one proposal is to use sports wagering revenues, which is about $2 to $3 million per year. Under that proposal the state would distribute that to counties to help offset the costs of services. Mitchell, who represents all of Henry County, said that county is struggling with ambulance services as is Lee County.
The next budget for Lee County includes an additional $75,000 for Lee County Emergency Medical Services ambulance service, for a total subsidy of $500,000.
Fraise said the county is right up against the 2% state mandated soft cap and said the state needs to classify ambulance services as an essential service to help with reimbursements.
Kurtz said he’s been in State Auditor Rob Sands’ office talking about Medicaid payments.
“That’s the crux of the problem. We either underpay, delay payment, or don’t pay at all,” Kurtz said. “He’s had several investigations over Medicaid and he said the figures he’s getting almost are unusable, Kurtz said. “So this is gonna be a fight.”
Kurtz said he favors moving back to a state-run Medicaid system.
Taylor said he’s been working on the issue since last summer and has had a couple rural Republican senators agree with his position. However, Taylor said he can’t get them to sponsor a bill to define ambulance services as an essential service.
“I’ve had absolutely no luck in getting either of them to sign on with me for a bill like that. As we all know in this room, if I don’t have a Republican sponsor on the bill, it’s dead on arrival.”
But he said yesterday he heard that Republicans would support a county-by-county bill to consider ambulance service an essential service, as opposed to a statewide essential service. And he hopes that bill will get through the legislature.
Kurtz said he’s working on state passenger rail issues into Iowa City and through the state. He’s also involved in nationwide Solutionary Rail discussions. Solutionary Rail is the electrification of the rail system and could be a boon to the area with Union Pacific and Burlington Northern Santa Fe moving through the area.
He said another big push this year will be cyber security, and he may be involved in developing some legislation in a bi-partisan effort.
Mitchell said he’s working to target workforce issues in the rural parts of the state.
He said he wants to market to people in Puerto Rico to come to Iowa to live and work. He said he’s met with Iowa Director of Economic Development Debi Durham, the governor’s office, the speaker of the house, and hopefully the senate soon, to start a grant program to encourage participation in the program.
“I see it as a real tangible, substantive way to get people to the state of Iowa and get people working here.”
He’s also working on a grant program for people to develop micro brews and other places that are appealing to younger Iowans to keep them in the state or incentivize a move to back to the state.
Taylor said he’s looking at a bill that would freeze property tax for anyone making less than $8,000 a year. He also has a bill to focus on rural broadband access that could work with the Governor’s proposed $15 million increase in funding for those efforts.
Taylor also said he’s working on a bill that would make it a misdemeanor to transport an unsecured pet in a vehicle. He said his proposal would increase penalties to a felony if the animal is killed in a motor vehicle accident where the animal wasn’t secured. He is also proposing a felony for anyone found guilty of beating a pet.