$600 Million Tax Increase Building Up Steam

From this week’s House Republican Newsletter:

Another Tax Increase On The Table: Federal Deductibility

On February 19, 2009, Iowa Senate Democrats announced the possibility the legislature will move to eliminate an important tax benefit available to Iowans and especially important to low and middle income taxpayers; federal deductibility. Democrat legislators are pushing the proposal under the guise of tax reform and an effort to simplify the tax code. However, the only thing that is certain is the state tax liability on every Iowan will increase if federal deductibility is revoked. Taxpayer advocates and proponents of federal deductibility claim eliminating the law equates to a “tax on a tax”.

Federal deductibility gives taxpayers the ability to fully deduct 100% of all federal tax payments on their state income tax returns. This is extremely important to low and middle class income taxpayers who rent a home or apartment and are unable to deduct property taxes from their income.

In addition, this week Governor Chet Culver indicated his support for repealing the law. However, the majority of Iowans do not agree. According to an Iowans for Tax Relief (ITR) statewide survey conducted in January 2009, 72.5% of Iowans support keeping federal deductibility on the books. Furthermore, ITR estimates that rescinding federal deductibility will cost Iowa taxpayers $600 million.

House Republicans will stand by Iowa taxpayers and continue to fight against policies that seek to increase taxes on Iowa families. While it is never wise to allow the government to increase the amount of hard earned dollars it withholds from individuals, it is especially destructive to do so during times of economic uncertainty. Iowans know better than government how to spend and invest their money and House Republicans are committed to allowing them to do so.

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