Iowa tax cap faces budget deficit, new governor

Audio By Carbonatix

(The Center Square) - Voters in Iowa approved an amendment to the state constitution that would make it more difficult for the legislature to raise individual income taxes. However, the amendment could run into problems with a newly elected Democratic governor and more than a $1 billion budget deficit. 

Iowa voters approved Amendment 1, a constitutional amendment to require a two-thirds majority in the state legislature before raising income taxes throughout the state. Iowa currently has a flat individual income tax rate of 3.8%.

Amendment 1 passed with 56.2% of voters who selected “yes” on their ballots, according to the Associated Press. The amendment’s passage would make it more difficult to advance certain spending priorities, after Democrat Rob Sand flipped the state’s gubernatorial race, according to AP.

“Iowans delivered a major structural defeat to the left last night,” said Alan Ostergen, chief counsel at the Kirkwood Institute.

Bernie Hayes, chair of the Linn County Republican Party, said the amendment is a common sense solution to prevent government overreach.

“It means that you don’t just get to raise taxes on a whim,” Hayes told The Center Square. “That forces us to look at our spending, to look at our priorities and say, ‘Do we really need to do this?’”

Iowa Governor-elect Rob Sand focused his campaign on promises to provide universal preschool and expand Medicaid throughout the state. Democratic county organizers said these priorities could be made more difficult by the passage of Amendment 1.

Rob Sand’s campaign did not respond to The Center Square’s request for comment in time for publication.

Kay Pence, chair of the Scott County Democratic Party, said passage of the amendment is cause for concern with Sand’s agenda. She pointed to Iowa’s  state budget deficit to explain issues with passage of Amendment 1.

“This budget gap has been filled with reserves, which are rapidly being depleted. Sand has proposals to close the budget gap, such as eliminating the private [Managed Care Organizations] to bring Medicaid administration back to the state and legalizing marijuana," Pence wrote in an email message to The Center Square. “Sand will need to work with a (R)epublican majority in the legislature to get anything done.”

Pence said most voters she spoke with opposed the amendment, even though it passed. She cited confusing language for the amendment’s passage.

Sand has also made a key pillar of his campaign halting tax breaks for data centers in Iowa. Pence is optimistic that a supermajority in the legislature will be reached to oppose data center development.

“As universally unpopular as tax breaks for data centers are, it should be possible to reach a supermajority to eliminate or scale back that tax incentive,” Pence wrote. “This tax measure was by the rich and for the rich. Citizens must watch how campaigns are financed and who is buying your legislators' votes.”

Hayes said the amendment will allow legislators to operate with greater caution in spending projects.

“It makes us more frugal and look at other ways or other possibilities of how we can accomplish the same thing with the funds that we have,” Hayes told The Center Square.

The amendment is set to take effect by Nov. 30.