One of the most powerful political outfits in the state lost its leader yesterday when Ed Failor, Jr. resigned his post at Iowans for Tax Relief.
While it has also called for lower rates, the “Taxpayer’s Watchdog” has built its existence around preserving tax breaks, most notably the deduction for state and local taxes. Its dogged refusal to contemplate trading the deduction for lower rates, combined with funding some successful primary challenges of legislators who have crossed it, has made Iowans for Tax Relief a powerful obstacle to serious tax reform.
This part of the organization’s press release after last week’s item veto of bonus depreciation and an expanded earned income credit underlines how the organization promotes bad tax policy:
Second, Governor Branstad took away important tax relief specifically targeted at low-income Iowa families with his veto pen. The Earned Income Tax Credit (EITC) would have helped Iowa working families make ends meet through a tax credit which would pay for important needs, like child care and groceries.
The earned income credit is refundable, and most recipients have little or no state tax liability — making it a welfare program run through the tax code. Like Grover Norquist at Americans for Tax Reform, ITR apparently believes a spending program becomes something else when it is run through a tax return. The “Taxpayer’s Watchdog” never barked when the Iowa Film Office was wasting tens of millions on the Iowa film credits, for example; the dog was also quiet when the legislature was enacting the boondoggle.
This map from the Tax Foundation gives an idea of what ITR has accomplished in Iowa tax policy:
Click to enlarge.
The accomplishment? Iowa has one of the highest individual tax rates in the country, the highest corporate rate, and a tax law of Byzantine complexity.
It’s unlikely that ITR will change its views as a result of a new leader. That means it will continue to be difficult to advance real tax reform, with low rates and few loopholes, in Iowa.
Related: Spending run through a tax return is still spending
UPDATE: More on the story from Dave Price and O. Kay Henderson.