Some conservation groups were quick to endorse a Republican plan to fund natural resource programs through a state sales tax hike that really isn’t a hike at all. The proposal is part of a broad overhaul of the state’s tax system that imposes a flat tax rate of 4%, which will result in changes to sales taxes and likely local property taxes and fees.
Twelve years ago, Iowa voters overwhelmingly approved an amendment to the state constitution calling for a permanent revenue stream for environmental funding. For 12 years, the legislature ignored voters and did not raise the sales tax. This year, the GOP is using fiscal sleight of hand to reduce local control, move natural resource appropriations from the general fund to a special account fed by sales tax, and to reduce the burden of income taxes.
The legislation will eliminate the local sales tax on options and convert it to a statewide sales tax. Three-eighths of that one-cent sales tax will go to natural resources. As a result, the City of Storm Lake and Buena Vista County will lose three-eighths of a cent in revenue. The state promises to return the rest to local municipalities. They could lose the entire penny – the state is notorious for reneging on commitments to local government, such as paying property credits or filling local coffers for state-ordered property tax relief on compounds of apartments.
Storm Lake and Buena Vista County direct their local option sales tax revenue to roads, property tax relief and debt reduction. We have complained a lot about the deplorable state of our roads and city streets – Circle Drive is a scare, Geneseo Street a cattle track, Irving Street battered and forgotten, Memorial Drive gravel, the Linn Grove Bridge in the limbo with Business 71. We need local option sales tax money – all of it – to meet urgent needs and control property taxes.
The idea of the constitutional amendment was to increase the overall state sales tax, not to rob local governments piecemeal. They’re going to get robbed, bet on it. They will have to rely more on property taxes to maintain services. Meanwhile, the new state sales tax trust fund where Paul robs Peter will free the general fund of any obligations to natural resources. Thus, overall funding for natural resources is unlikely to increase. Income taxes will decrease because the burden on the general fund is relieved by sales tax. Basic regressive tax policy – taxing the poor, who pay a disproportionate share of their income in sales tax.
The local government will have to pray for higher property assessments and charge more fees for basic infrastructure (like street assessments on your property for curb and gutter work), in order to maintain services. The Raccoon River won’t be any better because we’re just moving the money pots around, not making them bigger. Voters intended to increase the land and water share, but the legislature is just mixing the shells while you try to watch where three-eighths of the penny is.
This is bad tax policy. This is bad environmental policy. He will starve the town hall and the courthouse. It will deny local flexibility while demanding local accountability. It will not increase conservation funding more than $100 million, as voters thought. It will only relieve the general fund of this amount.
We should keep the local option sales tax unchanged. We should raise the state sales tax so that three-eighths of a cent is permanently dedicated and added to conservation funding. It has never been on the Republican agenda for the past 12 years. It’s not now either. The goal is the elimination of state income tax, not the removal of nitrates and phosphorus from the Mississippi River watershed.
The flat tax proposal will cost at least $1 billion more than the $1.2 billion budget surplus Governor Kim Reynolds is boasting about this year. The difference will have to be made up. They rely on you not noticing that they are grabbing local sales tax and spending it to eliminate corporate income tax. When the bridge collapses, they will direct you and your complaint to the Board of Supervisors. And when the Saylorville Reservoir remains filled with toxic algae, agribusiness apologists will point out the pointlessness of spending all the sales tax money on it. The shell game never stops.