Tax Time in the City?

The AP picks up a weekend Des Moines Register story detailing the initial Statehouse rumblings over a proposal that would allow cities to collect an income tax. From the AP version:

A measure that would allow cities to tax the income of residents to reduce their reliance on property taxes will be proposed to lawmakers when they convene next month.

Cities and counties generate more than 80 percent of their budgets from property taxes and many people believe the system is outdated.

The issue pits local governments and property owners against anti-tax groups that want government to cut costs rather than expand sources of revenue.

“I think it’s a 30-year problem in search of a solution,” said Sen. Joe Bolkcom, D-Iowa City, who is co-chairman of a legislative committee that will debate the idea.

 This is, of course, of great interest to city leaders in Cedar Rapids, who have been pleading for years for lawmakers to give them more “tools” for raising revenue. They made the pitch again last week to Gov. Chet Culver, who was in town Tuesday for a flood commemoration.

The idea amounts to fighting words for conservatives. This from Krusty Konservative:

The tax proposal from the League of Cities should scare the daylights out of you. We are already taxed to the max. Our home assessments are already out of whack so that local government can generated their needed income without “raising” taxes. Chet Culver and the Democrats have raised taxes and fees, and will have to do it again to balance the books, and a gas tax increase still looms. And now the cities and counties want to tax your income.

I just have one question, when will we audit state government and get rid of government programs that are not needed or are duplicated by other state agencies? Sure, Governor Culver ordered a 1.5% across the board cut, but why can’t we make it 10%? I know it would hurt, but why should state government feel less pain in the pocket book than the citizens of our state?

 Matt Strawn, who is running for Republican Party of Iowa Chairman, also weighs in:

This proposal is political cover for Democrat legislators and Governor Culver. Numerous Democrat legislators campaigned, and won, on an anti-tax platform, while Culver himself is now saying tax increases have no place in the 2009 legislative session.

This policy is designed as a legislative slight-of-hand to allow those legislators and Culver to support higher taxes without having to vote for, or sign into law, a direct tax increase. Pretty clever, huh? Just watch, these legislators will attempt to claim with a straight face that a vote for this proposal is a vote that merely provides local municipalities the power to tax, not mandate that they do so.

 It’s possible lawmakers will do something to provide some “revenue diversification” for cities, but I seriously doubt the final package will include this proposal. True, Sen. Bolkcom is chairman of the Ways and Means Committee, but he’s hardly been the source of slam-dunk tax proposals. He can’t make something like this happen without broad support among leaders and in his caucus. I doubt they’ll back it.

Lawmakers likely will be too busy foraging through the couch cushions for revenue to spend on their own priorities to spend much political capital helping out local governments. Last time the state hit a budget rough patch, the Legislature actually actually cut state aid to local governments.

That was also the year lawmakers created the “Program Elimination Commission,” which was supposed to sift through state government with a fine-toothed comb, looking for unnecessary programs. It was really PR window-dressing that eliminated exactly zero programs. Lawmakers would rather drain off-budget accounts and pray for a good economy to return than eliminate anything.

Most municipalities have done a much better job than the state of slicing fat from their budgets. But I still don’t they’ll be rewarded with big new taxing powers.


1 Comment

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One response to “Tax Time in the City?

  1. Martha Not-Stewart

    I hope that you are right and cities are not allowed to tax income!

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