Iowans for Tax Relief Foundation recently partnered with our friends at the Dickinson County Taxpayers Association for a discussion of Amendment One, the proposed constitutional amendment that will appear on Iowa’s November ballot. The group invited us to explain what the amendment would, and would not, do and to address some of the arguments surrounding it. The conversation also provided an opportunity to examine several common misconceptions about the amendment and compare them with what the proposal actually says.
What Amendment One Would Do
Amendment One will appear on Iowa’s November 3 ballot. It would require a two-thirds vote in both the Iowa House and Senate to increase an individual or corporate income-tax rate or create a new state tax measured by income.
A “yes” vote would add that requirement to the Iowa Constitution. A “no” vote would preserve the current system, under which such legislation generally can be approved by a simple majority.
The amendment would not automatically reduce or eliminate Iowa’s income tax. It would not mandate spending cuts, increase the sales tax, or change any other tax. It would simply raise the number of legislative votes necessary to enact certain income-tax increases.
Before reaching voters, the proposal had to be approved by two successive Iowa General Assemblies, as required for amendments proposed by the Legislature.
Supermajority Requirements Are Not Unprecedented
Opponents have described Amendment One’s two-thirds threshold as undemocratic because a legislative minority could block an income-tax increase. But supermajority requirements are already used for many decisions at all levels of government.
The U.S. Senate effectively requires a 60-vote supermajority for most legislation because 60 votes are generally needed to overcome a filibuster. Congress and the Iowa Legislature both need a two-thirds vote to override a veto. The Iowa Senate requires a two-thirds vote to confirm many gubernatorial appointments, and local-government bond proposals require 60 percent voter approval in Iowa.
Iowa also would not be the first state to establish a heightened threshold for tax increases. 16 other states have adopted constitutional or statutory supermajority requirements applying to certain taxes.
Would the Amendment Prevent Iowa from Responding to an Emergency?
Another argument is that Amendment One could restrict the state’s options during a recession or fiscal emergency. The amendment would make an income-tax increase more difficult, but it would not prohibit one. If two-thirds of both chambers agreed an increase was necessary, lawmakers could still enact it.
Tax increases also are not the state’s only response to a downturn. During the Great Recession, Iowa relied heavily on spending reductions and reserve funds. In 2009, for example, Governor Chet Culver ordered a 10 percent across-the-board reduction in spending after revenue estimates declined, and the state also transferred money from its Economic Emergency Fund. Other options can include reviewing tax credits and exemptions, lower-priority expenditures, or programs tied to federal funding.
It’s likely that the main question to be answered during any sort of “emergency” is whether the best thing for Iowans in that circumstance is to make them send more money to state government. And Amendment One would not settle that debate. It would, however, require broad legislative agreement before lawmakers could choose certain income-tax increases.
Protecting Priorities Without Automatically Raising Taxes
Critics have also warned that the amendment could threaten education, healthcare, or public safety. But Amendment One itself would not require reductions in those areas. Budget decisions, including which programs receive increases, remain level, or are reduced, would continue to be in the hands of our elected officials and implemented through the state budgeting process.
Likewise, most police and fire services in Iowa are financed primarily at the local level. Amendment One applies only to state taxes measured by income and wouldn’t impact local government decision making.
Spending restraint and tax increases both involve tradeoffs. The amendment would not determine how those choices are made; it would only establish a higher legislative threshold for certain income-tax increases.
The Protection Would Extend Beyond Large Corporations
Because Amendment One applies to both individual and corporate income taxes, some opponents have characterized it as a corporate tax break. The proposal, however, does not itself reduce the taxes of any businesses, nor does it provide any additional credit or create any new loophole.
The same legislative threshold would apply to income-tax rate increases affecting individual taxpayers, families, farmers, sole proprietors, entrepreneurs, Main Street businesses, and corporations. Amendment One does not distinguish between large and small taxpayers. It establishes a two-thirds legislative threshold for the income-tax changes covered by the amendment.
Our discussion in Dickinson County reinforced why it is important for Iowans to understand exactly what Amendment One would change and what it would leave untouched. Many of the concerns raised about the proposal involve decisions that would not be dictated by the amendment itself, but would remain in the hands of Iowa legislators, just as they are today. We appreciate the Dickinson County Taxpayers Association for joining us to examine the amendment and giving us the opportunity to address those questions directly.
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