Throughout the first-session of the 83rd General Assembly, House Republicans urged House Democrats to act on an important tax bill. Many members offered points of personal privilege on the House floor to highlight the bill’s importance and urge its consideration, and the House Ways and Means Committee moved to bring it up for committee vote. Unfortunately for Iowa taxpayers the majority party blocked every attempt and refused to take action. The legislation was House Study Bill 105, the Internal Revenue Code Update bill, or commonly referred to as the “coupling bill.”
Because Iowa tax laws are rooted in federal tax code, each year the Iowa Department of Revenue proposes the Internal Revenue Code Update, legislation to modify Iowa’s income tax code to reflect the changes made to the federal income tax law. Each year as a matter of state public policy the Iowa legislature typically conforms or couples with the changes made by Congress, but the legislature also has the ability to not conform or uncouple.
This year’s bill made several changes that were enacted by Congress in the 2008 calendar year that would have given a much need financial break to thousands of struggling middle-class Iowans. An example of these benefits include the following:
Teacher Expense Credit: The bill would have extended through the 2009 tax year the teacher expense deduction. This advantage permits eligible teachers to claim a deduction of up to $250 for out of pocket expenses paid on books, supplies, computer equipment and other qualifying materials that teachers use to educate Iowa students in the classroom.
This benefit allows middle-class students and families to deduct qualified tuition and related costs spent on higher education.
Tuition Deduction Credit: The bill would have extended through the 2009 tax year the deduction for college tuition and enrollment fees. This benefit allows middle-class students and families to deduct qualified tuition and related costs spent on higher education. The maximum deduction is $4,000 for an individual whose adjusted gross income is less than $65,000 ($130,000 joint return), and $2,000 for an individual whose adjusted gross income does not exceed $80,0000 ($160,000 joint return).
2008 Stimulus Checks to individuals: In 2008, the Iowa legislature passed legislation that specified that federal stimulus checks issued to individuals in 2008 would not be subject to Iowa individual income tax. The bill would have ensured those individuals who did not receive their rebates until the 2009 calendar year also would not be taxed by the state.
Itemized Deduction for Disasters Related Losses: The allowance of net disaster losses to be fully deductible as an itemized deduction.
In addition, other tax breaks to individuals and small businesses affected by the 2008 storms would have been made available to Iowans had HSB 105 been passed and signed into law. In fact, many tax filers may have filed their taxes under the assumption that these changes were made. However, because the majority party did not take action, many taxpayers have discovered, or soon will, that these benefits are not available and will be forced to amend their 2008 state tax returns, spending even more money to pay their taxes.
During these turbulent economic times, it is the responsibility of the legislature to do everything in its power to help those in need. Sadly, Democrats did not feel it was necessary to extend a helping hand to disaster victims, teachers, parents, students and small business owners.