|
|
|
Representative Ro Foege
Report from the Iowa Legislature
February 8, 2004
Budgetary Bombs
Last week The Iowa Supreme Court tossed out Iowa’s structure for taxing land-based racetrack casinos at a higher rate than riverboat casinos. In the surprise decision, the Court ruled that a 10 year old system of taxing racetrack casinos at a higher rate than riverboats violates the Iowa Constitution.
Racetracks paid a tax rate of 36% while riverboats paid 20%. The 1994 law allowed slot machines at racetracks to set their tax at the same 20% rate as riverboats until 1997. After 1997, the tax increased 2% per year until it reached 36% in 2004. In 2002, the Des Moines, Dubuque and Council Bluffs racetracks filed a suit alleging that the higher tax violated the U.S. Constitution’s Equal Protection Clause.
The ruling could cost the state government $250 million. The state owes the three race tracks who won the legal battle more than $112 million in back taxes, and ongoing revenue losses total more than $138 million since 2002.
This does not directly affect the state general fund, since these revenues go into the Rebuild Iowa Infrastructure Fund, which pays for various environmental and infrastructure projects such as the new Supreme Court building and remodeling the State Capital.
The Iowa Supreme Court sent the case back to the District Court to determine the amount of overpaid taxes that must be refunded to the three racetracks. This is expected to be $102.4 million, plus interest. The court may set the same interest rate as the state charges for late taxes, which is currently 6%.
In addition to this recent ruling, we now await another budgetary time bomb. Last year, in the special session of the Legislature, the majority party attempted to combine some very good economic development ideas with a $310 million income tax cut in two large bills. Last June, Governor Vilsack sensibly item-vetoed the tax cut portion of the bills, because the state was already in financial trouble. Now, the majority party is asking the courts to rule that the Governor cannot item veto the tax cuts that were a part of those bills.
I believe the Governor was fiscally responsible in vetoing a huge income tax break for the wealthy that Iowa cannot afford, at a time when important services are being cut at the local level. The Governor’s item veto also protected workers and consumers by vetoing limits on lawsuits, and he vetoed sections that placed unfair limits on the rights of injured workers.
I am also supportive of his item veto that prevented a tax increase on homeowners and older Iowans by striking down the provision which would have ended the phase-out of sales tax on residential utilities. And now, the majority party is spending your tax dollars in a lawsuit to reverse the Governor’s vetoes, thus increasing the current deficit. That would mean cuts to local schools, diminished access to health care, and more costs shifted onto local property taxpayers.
I continue to pursue the goals that I listed at the beginning of this session:
- No more cuts to public schools or health care programs for children and seniors.
- No more cuts to programs that provide support and services to vulnerable children in the child welfare and juvenile justice system or in special education programs.
- No more shifting the state’s budget problems onto the backs of city and county property taxpayers.
I look forward to hearing from constituents about the work of the Iowa Legislature.
You can write me at the State Capitol, Des
Moines, IA 50319; call 515/281-7328 or e-mail me at
ro.foege@legis.state.ia.us.
|