Democrats have made it official: They are looking to eliminate federal deductibility. They rolled out what they are calling a middle class tax cut, but lets call a spade a spade. Eliminating federal deductibility is a tax on a tax.
If you don't have kids or own a house, you're really screwed. Some Iowans use federal deductibility to lessen their tax burden and Iowa is one of a few states that still does that.
The Democrats are going to say that this is a revenue neutral thing to do, but what happens next year when they don't have the federal stimulus money to plug the gaping deficit hole and they need to up the ante and increase the tax burden even more? We're just sayin' - it's a pretty real possibility.
After the Democrats pass their “tax cut” - which really totals about 17 cents - Iowa families could purchase a gallon of milk and loaf of bread after only 28 days of saving.
$3.31 for a gallon of milk $1.40 for a loaf of bread $.17 per day tax cut by the Democrats……..priceless
Senate Democratic Leadership is making a bold move by recently announcing that they will attempt to eliminate federal deductibility. The message signals that Iowans should brace themselves for a tax increase. Based on the most recent information, eliminating federal deductibility would be a tax increase of $594 million. An Iowa household earning $45,000 would receive an average of a 5% increase in their taxes or $222.
Iowa is one of a handful of states that allows a 100% deduction for federal income tax payments on the state individual tax return. It protects Iowans from paying a state income tax on money used to pay their federal income tax. It is the largest way some Iowans may lessen their tax burden.
Democrats have tried to disguise the potential change by claiming it is tax simplification and it makes the system fairer. It looks like the Democrats’ definition of simplification is different from the taxpayer’s definition since this elimination actually raises taxes.
Proponents of the elimination of federal deductibility claim the deduction allows “wealthy” Iowans to avoid paying their “fair share” of Iowa personal income taxes. This data shows that the top income earners in the state are already paying a significant share of the total Iowa personal income tax burden. In fact, the top 10% of Iowa taxpayers pay about 40% of all Iowa personal income taxes. The next 20% pay about 30% of the burden, the next 20% pay less than 20%, and the bottom 50% of all Iowa income taxpayers pay less than 10% of the total Iowa personal income taxes.
Proponents have also argued that if Democrats eliminated federal deductibility and then lowered the tax rates it would make the state more attractive to persons looking to relocate themselves and along with their business in Iowa. This argument is a bit of a stretch. It’s hard to believe that an someone looking to relocate is only going to base their decision on the tax rates on their tax return. There are so many other factors that influence business including effective tax rates, business environment, accessibility to transportation, and quality of life - to name a few.
We’re still waiting for legislation to be introduced. And with Democrats looking for a way to pay for more of their state spending, the elimination of federal deductibility could be their ticket to get back in the black. When talk turns to eliminating federal deductibility and promises to reduce tax rates, Iowans should understand it is simply a shell game and they should get ready to pay more.
When your act is not quite ready for Broadway, you see how it plays in Peoria. This week the Governor took his Bonding Play to stages around the state.
The lights dim, the curtains part. The Governor rushes on stage. The set is the Capitol rotunda. The Governor is dressed in Sunday’s best. The temperature is warm. He is sweating as he excitedly runs across stage, his right hand held high above his head, a credit card in hand. “I’ve got a higher limit, we can spend more he says to those assembled. We don’t have to accept that Senate baby bond bill of only $175 million. It is not enough. We can do more. The state’s credit rating is triple A. We can borrow $750 million. It won’t affect our credit rating. Other states have borrowed far more. We can spend it now. Gaming taxes will pay for this for 20 years to come. You see how easy it is? It is the gamblers who will pay,” he says. The Governor’s stay on stage is brief. There is more shopping to do. The credit card has not been maxed out. The Governor’s exiting line: “Today is the time to spend.” With that he moves off stage.
The reviews were not pleasant. The critics not kind. The obvious – this bonding play is not destined for Broadway. It may be rescripted. Total scenes may be removed. Legislative democrats immediately rejected borrowing for transportation infrastructure, and rolled out their own $700 million borrowing plan. Iowans will see many versions of spending plans before adjournment. What is disappointingly missing is any attempt to prioritize spending within revenues received. It is apparent this administration is determined to live far beyond it’s means.
As I write this, the Senate is concluding debate on Senate File 389. This bill removes individual responsibility and replaces it with government run health care. The private insurance companies of this state will be required to subsidize a state bureaucratic corporation. It will require private citizens to disclose on income tax returns the status of their children’s health coverage. The bill mandates the Department of Revenue and Department of Human Services to create penalties for parents who do not sign their children up for government issued health insurance. This bill passed the Senate 30 – 18 with bipartisan opposition and will now go to the House.
There's been a lot of talk lately about budget cuts and how to get the state back in the black for FY 2009. Well, we have one suggestion: stop buying new state vehicles. The ones we have are clearly are not used.
We caught rows of idle state vehicles in a parking ramp with layers of dust on them. It's obvious they haven't been driven in quite a while.
So while the Democrats complain and complain that it is the national economy they ignore what they can do to take care of the budget mess they created. Republicans offered an amendment that would have suspended the purchasing of new vehicles for the remainder of FY 09 and all of FY 10. Instead of accepting this common sense amendment that would have saved over $10 million they rejected it. Instead of using the vehicle in this photo and many more just like it the Democrats would rather use your tax dollars to prop up Ford and General Motors.
Finally, we'll say it again: Democrats don't have a deficit problem, they have a spending problem and this parking ramp is proof.