Senate Votes to Boost Earned Income Tax Credit to 20 Percent

By Rod Boshart, Reporter

DES MOINES, Iowa – The Iowa Senate voted Wednesday to provide a bigger state income tax break for working families earning $45,000 a year or less.

Senators, by a 35-15 margin, agreed to boost the earned income tax credit from the state's current 7 percent tax credit to 20 percent of the federal tax credit for working poor families after turning back a Republican effort to broaden the break substantially.

Sen. Joe Bolkcom, D-Iowa City, said the 20 percent earned income tax credit contained in Senate File 422 would benefit about 210,000 Iowa households which are home to about 40 percent of the state's children.

"The tax relief is going to people who pay more than their fair share," said Bolkcom, the bill's manager who argued that Iowa has a significant poverty issue and the tax relief in the measure will target those working families struggling to make ends meet.

"They need help and they're getting it today. It's the right thing to do," Bolkcom said.

According to a fiscal note prepared by the Legislative Fiscal Agency, Senate File 422 would provide $56 million in relief in fiscal 2014, $54 million in fiscal 2015, $53.2 million in fiscal 2016 and $52.3 million in fiscal 2017. The current 7 percent earned income tax credit is estimated to carry a $30.2 million cost in fiscal 2013.

The bill applies retroactively to Jan. 1, 2013, for tax years beginning on or after that date.

Sen. Randy Feenstra, R-Hull, one of 15 GOP senators who opposed the bill on final passage, tried unsuccessfully to amend the bill by increasing the refundable earned income tax credit from 7 percent to 10 percent or providing a separate option whereby income taxpayers could receive a 1 percent reduction on their first $40,000 in yearly taxable income and 2 percent on the first $60,000.

Feenstra said his approach, which failed on a 24-26 verdict, would provide tax relief for 770,000 Iowans that could total $800 per single filer and $1,600 per couple. However, Bolkcom said the amendment would cut the benefit to lower-income households by half and dilute the economic impact of the tax relief.

The bill now goes to the Iowa House, where GOP senators doubted the bill would get consideration. Republicans control the House by a 53-47 majority.
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