COUNCIL BLUFFS — Iowa Gov. Terry Branstad won’t pursue the elimination of corporate or individual income taxes in the Hawkeye State, as Gov. Dave Heineman has in Nebraska.
Instead, Branstad is concentrating on reducing property taxes in Iowa, something he believes could be accomplished this legislative session.
“We chose to focus on the property tax,” Branstad said in an interview Thursday. “Realistically, I don’t think we can eliminate (income taxes) in Iowa.”
Branstad was in Council Bluffs on Thursday to give a shortened version of his Condition of the State address, which he delivered to a joint session of the Legislature in January.
The governor said incomes taxes are too high in Iowa, and he wants to look at reducing them.
“But our bigger problem is our property tax. And if you ask the citizens of Iowa, which tax do you hate the most, No. 1 is property tax,” Branstad said.
Commercial property taxes have been an issue in Iowa for years, with both Democrats and Republicans agreeing change is needed. Iowa commercial property is taxed at 100 percent of its assessed value, while Nebraska and other surrounding states provide business tax incentives to offset such costs.
Also in Iowa, residential taxes are tied to the value of agricultural land, which is rising along with commodity prices.
Branstad’s budget proposal this year would substantially cut Iowa’s commercial property taxes.
His plan also attempts to limit residential property tax increases, allocates new spending for education and establishes incentives to keep more medical school graduates in the state.
When asked about his interest in seeking the seat held by Sen. Tom Harkin, who will retire after his term ends in 2015, Branstad said he prefers his job as governor. U.S. Rep. Bruce Braley, a Democrat from Waterloo, announced Thursday that he would run for the seat.
Branstad spoke to about 65 people at the Council Bluffs Public Library.
During a question-and-answer period, an audience member asked Branstad about increasing the gas tax. Some have said it should be increased to help fix or replace deteriorating roads and bridges. Iowa’s fuel tax rate was last increased in 1989, to about 20 cents per gallon, depending on the type of fuel.
Branstad suggested the tax should be called a “user fee” — after all, motorists using Iowa’s roads pay the tax when they buy gas. But he said property taxes need to be addressed first.
Nebraska adjusts its gas tax every six months to account for changes in the use and price of motor fuel. The tax will be 24.6 cents per gallon through at least the end of June.
Branstad also was asked why Iowa decided to partner with the federal government in creating an insurance exchange for health care consumers under the Affordable Care Act, suggesting that the state should have followed Nebraska’s example and opted against creating an exchange.
Branstad said Nebraska’s choice means it will default to the federal system. Partnering with the federal government offers Iowa more flexibility, he said.
“I’m not sure that they are right or we are right. I guess we’ll all find out,” he said. “There was no good choice.”
Branstad’s education plan raises minimum teacher salaries and provides incentive bonuses to some educators, as well as making other changes. The governor has told lawmakers he wants to see his education plan passed before they debate general school funding.
Martha Bruckner, superintendent of the Council Bluffs school district, asked how her district and others were supposed to set a budget when state funding hasn’t been established.
Branstad replied that the Legislature needs an incentive to move forward with school reforms. But he believes a funding proposal can be passed by early March.
“I’ve been around long enough to know the Legislature will fight over money, and we will never get the substantial reforms we need,” he said.
After the meeting, Bruckner said she supported Branstad’s education efforts, but if the Legislature and the governor can’t agree on those reforms soon, school districts could be in trouble.
She said school districts face deadlines set out in Iowa law; the budget must be certified by April 15.
“It’s great if all of the people get together and sing ‘Kumbaya’ and come up with a plan that works,” she said. “If they don’t we are left ... in the lurch.”
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