News : Dave Stanley Opinion Editorial

Posted on April 9, 2009

Iowans Insist: No Tax on a Tax.

 Iowans Insist: No Tax on a Tax

By David M. Stanley

Why are Iowans angry with politicians trying to take away our right to deduct our federal income tax payments on Iowa tax returns?   

1.  Arrogant politicians don't listen to the people.

  • Polls for 25 years show most Iowans - 72.5% in January 2009 - want to keep our federal deduction.  Support is almost equally high among Democrats, Republicans, and Independents. 
  • Yet politicians keep pushing to repeal this deduction.  They don't listen. 
  • The Speaker of the Iowa House of Representatives ousted 650 Iowa taxpayers from the "people's House" during a March 31 "public" hearing on federal deductibility.  The people's employee evicted 650 of his employers. 

2.  A tax on a tax is wrong.

  • The state has no right to tax the money the IRS takes out of your paycheck before you touch it.  
  • Repealing federal deductibility is double taxation with vengeance.  The federal government takes its slice; then Iowa taxes you on that missing income you never see.
  • Many low-and-middle-income Iowans' largest Iowa deduction is their federal taxes. 
  • Small businesses will be hit hard by repeal of federal deductibility.  That means fewer jobs for Iowans.
  • Federal deductibility is simple fairness.  Taking it away is dishonest.

3.  Repealing the federal deduction will cause a big tax increase. 

  • Promoters say their repeal bill is revenue-neutral: the $595 million annual tax increase will be given back by cutting income-tax rates.  Beware: those are bait-and-switch rates, here today and gone tomorrow.
  • More than 450,000 Iowa taxpayers (individuals or families) will get front-door tax hikes now, this year.  Those immediate losers are spread through all tax brackets, top to bottom, including 236,719 taxpayers with incomes under $50,000 (Revenue Department figures). 
  • Any repeal of federal deductibility causes tax-shifting within each bracket.  The Revenue Department report shows huge numbers of losers in low-and-middle-income brackets, and huge numbers of temporary winners in high-income brackets (I'm one of them).  High-taxers say their bill helps middle-income Iowans, but it raises taxes now on a large share of them.  
  • A back-door income tax increase will hit most Iowans in 2011 when federal tax cuts expire and federal taxes rise.  Then the repeal bill will increase total Iowa income taxes by $190,417,760 and raise taxes on 718,107 taxpayers, including 316,941 below $50,000 income (Revenue Department figures).
  • This repeal bill cannot be repaired.  No matter how tax rates are juggled, any revenue-neutral repeal will create many winners and losers in every income bracket.
  • The second back-door tax increase is even worse.  It will hit all Iowa income taxpayers when politicians raise tax rates so they can spend more - likely soon, because of recent runaway state spending.  Lower rates are easier to raise.
  • Remember the 1986 federal law that cut tax rates and repealed some deductions?  It lasted four years.  Tax rates were raised in 1990 and 1993.
  • Do you trust the Governor and Legislature not to raise your tax rates?
  • In the hearing, only six persons, including five registered lobbyists, spoke for repeal; all represented organizations that want more state spending.  They know what this bill will do: raise taxes.

Free advice to Legislators:  

  • A huge, nonpartisan majority of Iowans say: DON'T take away our federal deduction on Iowa income-tax returns.  Listen to them!
  • Remember 1987, when a Republican Governor and Democratic House Speaker tried to repeal federal deductibility.  They were defeated by a firestorm from angry taxpayers.  Iowans are angry again now.
  • Ask your constituents: if you give up your federal deduction in return for lower tax rates, do you trust politicians not to raise those rates? 
  • In your next election, do you want a self-inflicted "I taxed your taxes" sign hanging around your neck? 

David M. Stanley of Muscatine is Chairman and co-founder of Iowans for Tax Relief.  He is a lifelong Iowan, served 12 years in the Iowa Legislature, is Senior Counsel of Pearl Mutual Funds, and is a retired lawyer.

Phone: office 800 334 8920 (ext 3577), home 563 263 7203.

E-mail:  dstanley@pearlfunds.com or kkoberg@taxrelief.org


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