Culver, Legislature, Call For Exempting Federal Rebate Checks From Iowa Tax

Iowa Gov. Chet Culver and legislative leaders agreed Monday to exempt federal rebate checks from state income tax, a move that would mean that most of the $1.5 billion Iowa taxpayers would receive as part of the federal stimulus package would flow back into the economy.

Culver said his meeting with lawmakers in both parties was productive and focused on stabilizing the state’s economy.

“I was pleased to have a productive, bipartisan meeting with leadership on both sides of the aisle to discuss the state of Iowa’s economy,” said Culver. “I asked the legislature to quickly pass legislation to ensure any federal rebate check Iowans may receive is 100 percent tax-free.”

The announcement by Culver came just hours after the governor told reporters that he was still weighing whether to make the federal rebate, which will amount to $600 for most Iowans, exempt from state taxes. Iowa taxpayers are expected to receive a total of $1.5 billion if the U.S. Senate approves the stimulus plan crafted by the U.S. House of Representatives and the White House.

Culver told reporters that although Iowa’s economy remains strong, he has monitored economic indicators carefully in recent weeks and has been in contact with federal lawmakers as they developed the stimulus package.Culver said Iowa’s economy is in good shape because of the strength of the state’s bio-fuels industry, the expected growth of the wind power industry, the size of cash reserves in state coffers and limited projected growth in his 2009 Fiscal Year Budget.

“This is not a time to be fearful. We have to be optimistic. We have to be vigilant. We have to be strong. There is no reason Iowans should fear this economic situation.”

Culver’s remarks come on the day that President Bush is preparing to outline the federal stimulus plan during a nationally televised address to the nation on Monday night.

Although Iowans have experienced some of the economic problems facing people in other states, bankruptcies in Iowa increased sharply in 2007 and the unemployment rate increased in December for the first time in more than a year. In addition, several Iowa companies announced layoffs or plant closings last year, including Maytag in Newton, Pella Windows in Story City, and a handful of mortgage and insurance companies in central Iowa.

The U.S. Department of Labor said that about 67,000 Iowans are unemployed, a slight increase from a year ago. The number of Iowans working increased by 1,000 but the number of people in the state on unemployment grew by 3,000, the Labor Department said.

Culver’s announcement regarding the plan to exempt rebate checks came just hours after Senate Minority Leader Ron Wieck, R-Sioux City, issued a press release complaining that the governor was doing little to protect the state’s economy. He said Culver was taking a “wait-and-see approach” to dealing with a possible economic downturn.

Wieck said in his press release this morning that the governor’s “wait-and-see approach” is not an option. Wieck called for the governor to be proactive and push for Iowa to create its own economic stimulus package.

“You always prepare for the worst and hope for the best,” Wieck said. “Unfortunately, our governor has forgotten half of that equation. He is only hoping for the best and that’s the easy part.”

In addition to the exemption on federal rebate checks, Wieck called for a reduction in state income taxes and a 50 percent reduction to the budget Culver proposed during his State of the State Address.