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Iowa Watchdog

Iowa goes retro to keep millions from tax that doesn’t exist

4/1/2014

DES MOINES, Iowa— For six years, the state has collected more than $20 million for a tax that didn’t exist.

When questioned about it, the Legislature adopted the solution preferred by small children who’ve done something wrong — they pretended it never happened.

THE LEGISLATURE GOES RETRO: The legislature has passed a retroactive tax so the state won’t have to refund millions its collected for a tax that didn’t exist.

THE LEGISLATURE GOES RETRO: The legislature has passed a retroactive tax so the state won’t have to refund millions its collected for a tax that didn’t exist.

In 2008, the Legislature passed a bill that accidentally included language repealing the section of the tax code that imposed a sales tax on heavy machinery purchased in the state. No one noticed until last summer, when a lawyer contacted the Iowa Department of Revenue seeking clarification about the tax.

Faced with the possibility of having to refund more than $20 million collected for a nonexistent tax, not to mention losing an estimated $7 million in taxes a year going forward, lawmakers passed a bill Thursday reinstating the tax and making it retroactive to the date of its accidental repeal.

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The governor is expected to sign it.

This approach opens all sort of possibilities. If the Legislature can declare its screw-ups never happened and retroactively erase any consequences those screw-ups may have had, then why it can’t do the same for the average Iowan?

What mistake would you like the Legislature erase to from your past? Once you figure that out, contact your representative.

As long your mistake isn’t bigger than taking $20 million under false pretenses, the Legislature really shouldn’t be able to refuse your request.

Contact Paul Brennan at pbrennan@watchdog.org. This story originally appeared on Watchdog.org.

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