Wednesday, May 18, 2011

Squeezing out the last drop of blood

Making Iowa's tax system "equitable" --- the idea behind the Republican/Branstad reform plan passed by the House last week --- is not equitable. Business and industry exists to make money. There's no reason to abolish a mechanism ensuring they pay taxes on a larger percentage of their property's value than homeowners. There is apparently broad consensus at the Statehouse that business taxes are too high. So, why not go with the Democratic plan? That would cut taxes businesses pay to the residential rate for the first $30,000 of value. After that, it would go up to the existing rate for businesses. This targets the tax cut to small business while providing a benefit for all businesses. Everyone loves small businesses and every politician loves to aim their legislative efforts at that kind of business. The only thing is (BROAD  GENERALIZATION ALERT!), Republicans really love big businesses and are always looking out for their interests. Republicans and Branstad say these lower taxes will attract more business to Iowa and spur growth of existing businesses. That is basically a tenent of trickle-down economics: Lower taxes to spur economic growth and pretty soon you'll be bringing in more revenue that ever before! There's never been any particular reason to believe that logic, and certainly not to accept it as a panacea solving all problems. Local governments --- cities, counties, school districts --- are concerned that the bottom line of this solution to "high taxes" would be sucking tax money from their coffers. But $500 million less annually for local governments across the state just means cutting costs and finding efficiencies, advocates of this plan say. We could start just educating kids through eighth grade, shut down public safety departments on weekends and let those roads revert to dirt trails --- you know, the way they were in the 1800s. Some Republicans have said, though, that local governments should have less taxing authority. There's no equity in the Republican/Branstad plan because tax money is precisely where local governments get their revenues to provide vital services that give us an excellent standard of living. Their primary purpose is not to make money by selling people products (like the businesses that would get the windfall under this plan). Even if Republicans are right in suggesting that local governments wouldn't lose tax revenues, opponents argue that the plan would result in taxes being shifted from businesses to homeowners. I'm sure that's the kind of equity all Iowans can get behind.

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