Branstad addresses corporate tax rate, property taxes

BY DORA GROTE | MAY 04, 2012 6:30 AM

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Iowa City community members crowded the University Athletics Club on Thursday to hear Gov. Terry Branstad discuss the effects of federal corporate income tax on Iowa.

"I do think we do have some changes that could take place there in terms of regulations," Branstad said. "We've been doing some things to make Iowa more competitive by speeding up the permitting process."

Branstad's spokesman Tim Albrecht noted discrepancies between corporate tax rates in the United States and Canada — 35 percent and 15 percent respectively — as driving businesses out of the States.

"What that does is makes us wildly uncompetitive when attempting to lure new businesses and industries," he said. "With a lower rate, businesses can pay employees better and pour money back into research and development."

Yet UI economics professor John Solow said lowering the corporate tax rate would most likely not affect Iowa City.

"If we were to lower the American corporate income tax rate, it wouldn't really favor Iowa City," he said. "It's not exactly a hotbed for manufacturers. If a business wanted to come to America, why would they come to Iowa City rather than San Francisco or Los Angeles?"

Those foreign countries with companies in Iowa City are often focused on wind energy, he said.

Solow also said there is more to national corporate-tax issues than just simply lowering the rate.

"It depends a lot on how you define income and the special treatment there is for different types of companies," he said. "There are large, very profitable companies that don't pay any corporate income tax at all, and lowering their rates won't affect where they relocate."

Higher education

Branstad seemed optimistic about his $20 million state appropriation proposal for state Board of Regents' universities, which faced a House bill that would cut $31 million from funding and a regents' request for a $40 million increase.

"We've been working with both the House and Senate on this," Branstad told The Daily Iowan. "Obviously, we ended up having to compromise with the individual legislators, but I think we're going to end up pretty close to our recommendation in the final analysis. But you know, it has to pass both houses by a constitutional majority, which means there has to be some give and take."

Education reforms

Yet Branstad was less confident about his major education reform passing, such as an application for a state waiver for the No Child Left Behind program.

"We want to at least make enough progress that we can get a waiver from the U.S. secretary of Education and No Child Left Behind. The only way we can get that waiver is if we can demonstrate we have an accountability system in Iowa that meets their expectations, and the Senate bill doesn't do that."

Branstad had also proposed a program in the last legislative session that would hold back third-grade students who don't pass end-of-year reading exams and called for repealing allowable growth.

"I don't expect we're going to get as bold an education reform as I believe we need this year, but there is always next year," he said. "We used to be the best in America in student achievement, and in the last 20 years we've fallen from best in America to middle of the pack.

Property tax

Branstad also discussed his property-tax proposal, which would reduce commercial and industrial property taxes by 40 percent in an effort to prevent an estimated $2 billion tax hike over the next eight years.

"We have a tentative agreement with the House and Senate, and we anticipate that that agreed upon bill will move in the House by Monday and hopefully in the Senate by Tuesday or Wednesday," the governor said. "This has been a 30-year process, but we're very optimistic that's going to happen, and it's very important."

Editor's Note:

A previous version of the story misattributed certain information. Quotes and information that were inaccurately attributed to Mark Nolte in the original version are now correctly attributed to UI economics professor John Solow.

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