Yesterday’s post on tax issues in the Iowa Governor’s race lamented the candidates’ timid approaches to income tax reform:
Far better to adopt the key planks of the Quick and Dirty Iowa Tax Reform:
- Eliminate the corporation income tax
- Lower the to individual rate to 4 percent or less.
- Eliminate all corporate welfare and special interest tax breaks
- Allow Iowa S corporations to elect to be C corporations, taxable only on distributions to Iowa residents, for Iowa filing purposes.
This would require ending federal deductibility, the sacred cow of the powerful lobby Iowans for Tax Relief, and it would take away annual taxpayer checks to influential corporations via the refundable Research credit. That probably explains why candidates are reluctant to do the right tax policy thing.
That prompted a phone call from an unhappy Ed Failor, Jr., President of Iowans for Tax Relief, who felt this was unfair to his organization. I explained that I thought IFTR’s hardline position in favor of deducting federal taxes on the Iowa return was an obstacle to improving Iowa’s tax system. He said that IFTR was willing to give up deductibility if there were adequate protections against subsequent tax rate increases. I invited him to send an e-mail response. This arrived shortly afterwards:
In 2003, House File 692, Division IV would have lowered the state income tax and eliminated federal deductibility. The bill included a contingent effective date for the elimination of federal deductibility. If a constitutional amendment requiring either a 60% majority of the Legislature to increase tax rates or a vote of the people to increase tax rates had been ratified, the rates in Division IV would have been applicable. If a constitutional amendment were not ratified, then the rates in a previous section of the bill would have been the applicable individual income tax rates, and federal deductibility would remain.
The legislation is available online at: http://coolice.legis.state.ia.us/Cool-ICE/default.asp?Category=billinfo&Service=Billbook&menu=false&ga=80&hbill=HF692
The lobbyist declarations for HF 692 (the Iowans for Tax Relief Lobbyists in 2003 were Boeyink/Failor (2)/Robinson, registered as