The fourth week of session was pretty busy. Committees are in a rush to get legislation in before the funnel deadline, and agendas have been packed with legislation. The Government Reorganization Bill passed the Senate and now is being taken up in State Government Committee in the House. I will keep you posted on its contents and what its effect will mean for the Iowa taxpayer.

As always, if you have any questions, or if there is some way that I can help, please do not hesitate to contact me by phone or e-mail.



Government Reorganization Bill

Last week the Senate passed (SF2088), a bill that begins to reorganize state government and cut costs. The House has now begun the process of reviewing the bill. And the State Government Committee has been assigned the task. While the legislation accomplishes some savings, the Legislative Services Agency reports that it will not save enough to meet the budget gap that exists. As was the case last session, Republicans have reviewed the budget in great detail and offered solutions that will achieve more savings up to $290 million to help close the budget gap.

The ideas presented include:

•Eliminate Power Fund and Office of Energy Independence: $25 million

•Eliminate the RIO office, give responsibilities to Homeland Security: $1 million

•Eliminate taxpayer-funded lobbyists: $4 million

•Cancel all Regents' sabbaticals for FY 2011: $6 million

•End all state benefits to illegal immigrant adults: $92.3 million

•Shift voluntary preschool responsibilities to Empowerment: $45 million

•Combine administrative functions at Regents universities: $62 million

•Eliminate funding for empty shelter care beds: $2 million

•Delay implementation of core curriculum for one year: $10.5 million

•Eliminate the family planning waiver: $2 million

•Sell and completely privatize the state vehicle fleet: $18 million

•Sell or lease the Iowa Communications Network: $15 million

•Cut funding office supplies, service contracts, equipment purchases: $5 million

•Eliminate the Just Eliminate Lies (JEL) program: $2.25 million



January 2010 General Fund Receipts Summary

Year-to-date gross receipts are at a negative 5.2 percent through January 2010, which still compares favorably to the Revenue Estimating Committee's (REC) estimate of negative 5.5%. A portion of the decrease in January's receipts was anticipated due to a processing change last year which influenced individual income estimate payment comparisons downward.



Personal Income Tax

Personal income tax receipts totaled $294.1 million during January. This represents $46.2 million or 13.6 percent less than the receipts of January 2009. Withholding tax receipts increased $8.7 million or 4.3 percent compared to last year.



Sales/Use Tax

January sales/use tax receipts totaled $119.6 million, which represents a decrease of $10.7 million or 8.2 percent compared to January 2009.



Corporate Income Tax

Corporate income tax receipts during January totaled $24.6 million, which is $25.3 million or 50.7 percent less than in January 2009. Fiscal year-to-date, corporate income tax receipts totaled $188.5 million, a decrease of 18.3 percent. Corporate income tax receipts are estimated to decrease 18.1 percent.



Refunds

For the month of January, the Department of Revenue issued $30.2 million in refunds on a cash basis. This compares to $26.7 million issued in January 2009. For the fiscal year-to-date, total refunds issued on a cash basis were $270.5 million. This compares to $253.4 million issued at this time last year.



Tax Credit Review

In a previous newsletter I mentioned that there was a review of Iowa's tax credits. A panel was composed to research tax credits and identify ways to protect taxpayer dollars by making tax credits more effective. It has since released a report of its findings. The report made several recommendations, some of which I am in agreement, but some seem to be merely ways to collect more taxes from hard-working Iowans.

As I stated before, we need to be very careful about how we handle tax credits. When they are eliminated or reduced, it is effectively a tax increase! Iowans are dealing with job losses, employers are struggling to stay open and the last issue they need to deal with is a higher tax bill. Raising taxes is not the answer to Iowa's budget problems.

Here is a summary of the panel's recommendations:

•Provide Greater Transparency of Tax Credits - I agree that we need to provide transparency for how our tax dollars are used.

•Eliminate the Transferability Provisions for All Tax Credits - Some credits are allowed to be sold or transferred if the beneficiary can't use them immediately.

•Develop an Effective Return on Investment Calculation for All Tax Credits - I also agree that we need to provide, as part of transparency and review of credits, a measure for how successful the credit is or is not and providing a return.

•Establish a Five-Year Sunset for All Tax Credits - I do not think that a sunset is a good idea. Many people and business decisions are determined for the long term and for the rules that are in place. This adds some uncertainty to businesses and hinders their ability to make those decisions. The Legislature has the opportunity to review credits whenever they choose and should review them on a regular basis.

•Cap All Currently Uncapped Tax Credits - This does not allow all people and businesses that want to use the credits to do so.

•Eliminate Certain Tax Credits

•Assistive Device Tax Credit

•Disaster Recovery Housing Project Tax Credit

•Early Childhood Development Tax Credit

•Economic Development Region Revolving Fund Tax Credit

•Film, Television, and Video Project Promotion Expenditures Tax Credit

•Film, Television, and Video Project Promotion Investment Tax Credit

•Venture Capital Tax credit - Qualified Business or Community-Based Seed Capital Fund

•Venture Capital Tax Credit - Venture Capital Funds

•Eliminate Refundability Provision of Research Activities Tax Credit - The refundability allows businesses to take all of the credit in the same year that it is used. By eliminating the refundability, it forces companies to take the credit over multiple years.

Here is the link to find the full report on the State of Iowa Tax Credit Review: http://www.dom.state.ia.us/tax_credit_review/files/TaxCreditStudyReviewReportFINAL1_8_2010.pdf

Here is the link for the Department of Management Agency report on the Tax Credits: http://www.governor.iowa.gov/files/state_of_iowa_agency_reports_on_tax_credits_final.pdf