Democrats say 'working Iowans' would get increased tax refunds under their plan

Legislative Democrats want to increase tax credits for working Iowans, as Republicans debate tax plans that would lower the state's income tax rate.

Democratic leaders in the Iowa House and Senate said Thursday they're seeking to double the state's earned income tax credit and to increase the child and dependent care tax credit for people making less than $90,000 per year.

Tax credits reduce the amount people owe in taxes and, in some instances, can generate annual refunds for taxpayers. Democrats believe their proposal would effectively cut taxes for low- and middle-income Iowans. 

"Our fair tax plan would put more money back in the pockets of working Iowans," said House Minority Leader Jennifer Konfrst, D-Windsor Heights.

Republicans in the Iowa House, Senate and Gov. Kim Reynolds' office are negotiating among themselves as they work out the differences between their three tax cut plans, which would involve steep cuts to income taxes, among other changes.

Democrats, who are in the minority in the Iowa Legislature, have not been consulted on Republicans' plans for tax cuts. But they said they will work to add their proposals as amendments to Republican bills and that their ideas deserve a hearing.

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"We will continue to propose policy because that’s our job, that’s our role," Konfrst said. "And Republicans, if they choose to ignore these again and again, are sending a statement that they don't care about what the people who represent hundreds of thousands of Iowans are proposing."

Iowa's earned income tax credit is coupled to the federal version of the credit. Democrats' plan would double Iowa's credit from 15% of the federal tax credit to 30%. That could result in a parent with three children and an income of $50,000 receiving an additional $6,600 annually.

More:Iowa Republicans have three plans to cut taxes. Here's how they compare.

And, in addition to increasing the amount of money that families who make less than $90,000 get from the child and dependent care tax credit, Democrats would remove a "cliff" from the credit so families aren't kicked off immediately when they hit the income threshold.

Senate Minority Leader Zach Wahls, D-Coralville, said the tax proposal is part of Democrats' broader attempts to "help Iowans' recover from the Reynolds workforce crisis."

"Fewer Iowans are working today than when Gov. Reynolds took office," Wahls said. "Because Republicans are driving workers out of our state and are unable to keep Iowans in the workforce, we don’t have enough workers to help keep schools, hospitals and small businesses open. Our tax plan rewards work, not wealth. We believe that we need to support Iowa workers who are the backbone of our economy with lower costs and tax cuts."

Wahls and Konfrst said Iowa should also invest more in apprenticeships and career training, make child care affordable, guarantee access to free, universal preschool to help parents get back into the workforce and give public schools a $300 million funding boost.

"Let’s make Iowa a better place where folks want to live, work and raise a family," Wahls said.

The Republican plans would each reduce Iowans' income taxes and take the state to a flat tax, eliminating the current progressive tax bracket system. Reynolds and House Republicans are proposing a 4% flat rate and Senate Republicans are proposing a 3.6% rate, with an additional mechanism to use state budget surpluses to zero out the income tax completely.

More:Kim Reynolds says she’s ready to negotiate with Iowa Republican lawmakers on tax cuts

The Republican plans would all exempt retirement income from state taxes. But Republicans disagree about whether to adjust corporate tax rates. Reynolds' plans would lower the corporate rate to a flat tax and take the rate from 9.8% to 5.5% if corporate revenues grow, while Senate Republicans would lower the corporate rate to 7.8% and end some business tax credits. House Republicans' plan would not lower the corporate rate.

The Senate's plan would also shift statewide sales tax revenue to fund water quality and outdoor recreation projects — an idea that's not included in Reynolds' or House Republicans' bills.

Stephen Gruber-Miller covers the Iowa Statehouse and politics for the Register. He can be reached by email at sgrubermil@registermedia.com or by phone at 515-284-8169. Follow him on Twitter at @sgrubermiller.