State Rundown 10/23: Cuts, Roads and Student Kickbacks

A coalition of Iowa student leaders is calling for a tax incentive to keep graduate and professional students in the state. Student government leaders from the University of Iowa, Iowa State University and the University of Northern Iowa want lawmakers to implement a 50 percent income tax break for graduate and professional students who reside in Iowa for up to five years after graduation. For students who choose to reside in rural areas, the tax break would increase to 75 percent. Student leaders say the measure would address a shortage of healthcare and legal professionals in the state. However, a recent survey of Iowa graduate and professional students found that employment opportunities were the biggest factor in choosing to remain in the state, not tax incentives.

The battle over road funding in Michigan continues. House Republicans managed to pass a road funding plan despite objections by chamber Democrats, though some say the measure is unlikely to pass. The measure would increase the state’s gasoline excise tax by 3.3 cents per gallon, increase the state’s diesel tax by 7.3 cents per gallon over two years, and increase vehicle registration fees by 40 percent. It would also shift hundreds of millions of dollars from the general fund to the roads budget. In a bizarre twist, House Republicans decided to tie these revenue-raising measures to a triggered personal income tax rate cut that would overwhelmingly benefit the wealthy and could ultimately repeal the state’s income tax entirely. Critics say the proposal would fail to raise enough revenue and that the income tax cut and general fund transfer could cause major budget problems down the road. They generally favor a larger increase in the gas excise tax. The bill is the latest salvo in transportation talks between the legislature and Gov. Rick Snyder that have collapsed into impasse. Voters rejected a sales tax increase to pay for road construction in May.

Nebraska Gov. Pete Ricketts will push a package of income and property tax cuts next legislative session, according to a recent address the governor delivered to Lincoln Chamber of Commerce. Ricketts claimed that cutting taxes would be the key to economic growth and would be his “No. 1 issue.” Similar efforts to cut income and property taxes failed in Nebraska during the last legislative session. An ITEP analysis of one of these plans found that wealthier Nebraskans would benefit disproportionately, while revenue losses would be drastic.