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Iowa lawmakers agree to spend surplus on tax cuts

April 19, 2011

DES MOINES - The Iowa Legislature moved quickly Monday to approve one-year tax cuts that supporters hope will jump-start the state economy and help avoid a shortfall in the next state budget.

The state is expected to have a surplus of $500 million to $700 million in the budget that ends June 30. The plan approved unanimously in both chambers Monday would use that money to pay for tax cuts and programs favored by both parties.

It would use the first $60 million of a surplus to create a fund for unspecified tax cuts as Republicans wanted. It also speeds business depreciation tax breaks and increases the earned income tax credit, which Democrats favor. It sets aside $18 million to pay legal bills for poor defendants and $27 million for mental health, prisons and community colleges.

Another $20 million would be used to reduce the waiting list to get into mental health treatment programs.

Iowa is projected to have a shortfall of $700 million to $900 million in the budget that starts July 1.

Members of the House-Senate conference committee that came up with the plan said they worked closely with Republican Gov. Terry Branstad's office and predicted he would sign the measure into law. Branstad, however, wouldn't commit to signing the entire measure.

"What I have said is for those issues resolving the budget mismanagement last year, I'm certainly supportive of that," he said. "In terms of taxes, we need to look at that in terms of the impact on job creation."

Branstad has called for lawmakers to cut in half the business income tax rate and pushed for deep cuts in commercial property taxes, neither of which was included in the plan.

Rep. Scott Raecker of Urbandale, the Republican head of the conference committee, said a veto would surprise him because Republicans worked closely with the governor in shaping the plan.

"I do believe it presents us with a path to move forward this session," he said.

Sen. Joe Bolkcom, D-Iowa City, another committee leader, said a veto of significant portions of the package would make the final couple of weeks of this year's session much more contentious.

"It would make for kind of a rugged ending," he said.



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