Governor Terry Branstad has nixed Iowa Democrats’ top tax policy priority for the second time this year. The governor signed the broad budget “standings” bill yesterday, but used his item veto power to eliminate several provisions, including an expansion in the earned income tax credit for working people. The governor’s veto message said,

“This change is estimated to reduce revenue to the state general fund by $28.5 million for fiscal years 2012-2013,” Branstad said. “It is my desire to approach tax policy in a comprehensive and holistic manner. As such, I urge members of the House and Senate to continue to work with my office on an overall tax reduction package that both fits within or sound budgeting principles while reducing those taxes that are impeding our state’s ability to compete for new business and jobs.”

Branstad vetoed the same tax credit expansion in a compromise bill the legislature approved in April. At that time, he also cited his “desire to approach tax policy in a comprehensive and holistic manner.”

Spending $28.5 million over two years would have helped at least 225,000 Iowa households, more by some calculations. The earned income tax credit goes entirely to lower-income and middle-income families earning less than $48,000 per year.

In a press call this morning, AFSCME Council 61 president Danny Homan described Branstad’s action as “mean-spirited,” and I would agree. In this economy, why would you block a little extra help to working households? Iowa Senate Ways and Means Committee Chair Joe Bolkcom noted in a statement, “Studies show that the Earned Income Tax Credit is the most effective antipoverty program for working families. Plus the money is spent at our small and Main Street businesses, helping to further spur our local economy.”

Branstad’s veto doesn’t look like smart politics either. During the 2012 legislative session, he wants to pass a major education reform package, comprehensive property tax reform and corporate income tax cuts. Yet he’s tanked the top Democratic tax priority twice. He is forging ahead with closing Iowa Workforce Development offices, even though saving those offices was high on the Democrats’ list throughout the 2011 session. Democrats have only a narrow Iowa Senate majority, but that majority held together for the last six months. I don’t understand why Branstad thinks he’ll be able to get any of his priorities through the upper chamber next year.

The Iowa Fiscal Partnership published a short piece on why expanding the earned income tax credit is good policy. I’ve posted that piece after the jump, along with the full text of Bolkcom’s statement on the Branstad veto and a comment from U.S. Representative Bruce Braley (IA-01).

Iowans for Tax Relief, an advocacy group that claims to be “the taxpayers’ watchdog,” was missing in action today. The organization endorsed Branstad in the 2010 gubernatorial primary as well as the general election. Iowans for Tax Relief criticized Branstad’s veto of the earned income tax credit expansion in April. Since then, the organization has had substantial turnover on its staff and board of directors. Still, you’d think they would notice the governor blocking a tax break for hundreds of thousands of Iowans.

Also from the standings bill, Branstad item vetoed a ban on bonus pay for state employees. His communications director says the bonuses are needed to attract and retain “exceptional employees,” but it looks bad for Branstad to insist on bonuses for his favorites while vetoing help for woking families. O.Kay Henderson noted at Radio Iowa that Republican lawmakers criticized Democratic Governors Tom Vilsack and Chet Culver for awarding bonuses to some state employees. Speaking on behalf of AFSCME, Homan slammed Branstad for “running around the state telling the citizens how the state’s going broke because they’re giving the union employees a two percent raise and a one percent raise and now he’s going to allow for bonuses for his department heads.”

If Republican legislative leaders comment on Branstad’s vetoes, I will add their statements to this post. So far, it’s been radio silence from the Iowa House and Senate GOP leadership.

EITC Veto Harms Families and Iowa’s Economic Recovery

Governor Vetoes Modest Boost in Credit for Low-, Moderate-Income Working Families

July 28, 2011

FOR IMMEDIATE RELEASE, THURSDAY, JULY 28, 2011

The Iowa Fiscal Partnership today released the following public statement regarding the Governor’s veto Wednesday of an improvement in the Earned Income Tax Credit:

Governor Branstad’s veto of the modest increase in the state Earned Income Tax Credit (EITC) hurts working people and the economy. The legislation would have increased Iowa’s credit from 7 percent to 10 percent of the federal credit.

The state EITC affects over 225,000 Iowa households, all of whom are working. Ninety-five percent of the benefits go to working families with children, all of whom have income of less than $48,000.

The EITC improves tax fairness, boosts income available to families raising children and reduces poverty. Research has shown it helps the economy, especially in difficult times.

Because of the federal EITC, most families with children do not owe federal taxes until their income is above $42,000, but Iowa’s income tax begins taxing families when their income is above $22,000. A family of four making $30,000 in Iowa would have received a state income tax reduction of about $97 through enactment of the EITC increase, if Governor Branstad had not vetoed the measure.

While this is not a lot to some families, it makes a difference for families who are working and trying to raise their children on what is only a little above the poverty level.

Stagnating incomes in Iowa have coupled with growing costs of basic household necessities to force tough choices on moderate-income working families trying to make ends meet. Money earned due to the EITC is spent on those necessities. It is one of several policy options that offer a way to both help the economy, and fill gaps between low-wage work and the cost of living.

The Iowa Fiscal Partnership is a joint budget and tax policy initiative of two nonpartisan, Iowa-based organizations, the Iowa Policy Project in Iowa City and the Child & Family Policy Center in Des Moines.

Statement from Iowa Senate Ways and Means Committee Chair Joe Bolkcom, July 28:

Gov. Branstad vetoes tax cut for working families AGAIN

Statement by Senator Joe Bolkcom, chair of the Ways & Means Committee

“Governor Branstad has once again turned his back on Iowa’s hardest working families by vetoing a bipartisan tax cut for 240,000 families earning less than $45,000 a year. He has again shown that he will only consider tax cuts that benefit Iowa’s wealthiest citizens and corporations.

“It is outrageous that Governor Branstad continues to thumb his nose at people working two or three jobs just to put food on the table-and are often still living below the poverty level.

“Studies show that the Earned Income Tax Credit is the most effective antipoverty program for working families. Plus the money is spent at our small and Main Street businesses, helping to further spur our local economy. Yet the Governor continually vetoes this effort, instead preferring huge, unaffordable tax breaks for Wal-Mart and other wealthy out-of-state corporations.

“The Legislature worked diligently to find common ground, pass a tax cut that would help Iowans struggling to recover from the national recession and get Iowa’s economy back on track. But once again, all we’re hearing from the Governor is ‘It’s my way or the highway.'”

Statement from Representative Bruce Braley, July 28:

“I’m disappointed by Governor Branstad’s veto, and I have to ask, “what are his priorities?” This bill was passed with bipartisan support and would have provided tax relief to thousands of hard-working Iowa families. This doesn’t make sense to me, and I don’t think it makes sense to middle class Iowans who are struggling.”