Stimulating Conversations from Des Moines

As the Gazette reports, Iowa Senate Republicans are forwarding a penny-wise, pound foolish plan to stimulate Iowa's economy. Read on...

The Iowa Senate's top Republican said today his minority caucus wants to extend the state's two-day sales tax holiday to all taxable items and temporarily reduce state income tax rates uniformly by $200 million to stimulate the economy.

However, Sen. Joe Bolkcom, D-Iowa City, chair of the Senate Ways and Means Committee, nixed those ideas in favor of boosting Iowa's earned income tax credit and funding programs that will provide long-term economic benefits for the state.

Senate GOP Leader Ron Wieck of Sioux City told reporters Republicans favor a one-time sales tax-free weekend in August that would coincide with the arrival of expected federal rebate checks of $600 to $1,200 to encourage Iowans to make big-ticket purchases that would fuel economic activity.

Currently, the two-day sales tax holiday applies to clothing, shoes and school-related items of up to $100 and generally provides about $3 million in tax relief. State officials said daily sales tax collections average $5.3 million but the expanded tax holiday likely would net a larger benefit if consumers made more and larger purchases to take advantage of the exemption.

Wieck also favored an across-the-board reduction in state income tax rates and withholdings to start as soon as an agreement could be reached and run through the end of 2008 that would produce a $200 million tax cut for working Iowans.

"We're talking about an infusion of money back into the economy," he said.

Wieck said he plans to offer the package when Gov. Chet Culver and legislative leaders resume talks on Monday aimed at formulating state efforts to stimulate Iowa's economy.

Culver estimated Iowans will net about $1.5 billion in federal rebates which state leaders have agreed to exempt from state taxation, and he is pushing for a $12 billion package of Medicaid and discretionary funding to states that could spur $150 million in transportation infrastructure improvements in Iowa.

"I would argue our tax relief has to be much more targeted and that we need to keep our eye on the ball by continuing our investments in education and health care and clean environment," Bolkcom said.

"Everybody has an idea about how to stimulate the economy. We have some in terms of our investments in continuing to educate our kids and keeping college affordable and the like," he added. "We think those are better investments to stimulate the economy at this point and it would be my sense that those (GOP) proposals are unlikely to move forward."