This is not the first time that Tom Vilsack has talked tax reform but in the past, such talks have usually evaporated shortly after the first scrimmages in the state legislature. This time it could be different. Governor Vilsack is asking Iowa Legislature to lower the marginal tax rates, cut or eliminate states taxes on pensions and Social Security taxes while reducing the number of state income tax brackets. In exchange, selected deductions such as federal deductibility will be eliminated.
These proposals signal a grass root change that could reverberate beyond Iowa. We are talking about a Democratic governor with political ambitions beyond Des Moines challenging a key ideology of his party. Vilsack’s proposal is a free market oriented tax plan that in the past would have been a non-starter in any Democratic caucus. He has surrendered to the Republican Party on a key plank and now, it is in the GOP leaders to run with it.
As one Republican legislator noted, the devil in the details. And there are two significant obstacles. The first is that the eliminating federal deductibility could raise the ire of many tax reform organizations. Among those who have oppose the elimination of this deductibility in the past includes Iowa leading tax cut activist David Stanley. The second obstacle is that many Republicans want an amendment in place that would make it more difficult to pass tax increases. The Governor has led the opposition to various amendments in the past. The latter is important since any measure that restrict tax increases will ensure the success of Governor Vilsack’s plan to overhaul the Iowa tax codes. The Governor is now saying that he will be willing to support limitations this time around, so it could be easier to eliminate federal deductibility in exchange for lower marginal tax rates.
Vilsack understand that tax rates matter and many businesses have made this clear to him and other Iowan politicians as they have attempted to encourage business to relocate in Iowa. In addition, he is willing to swallow Republican ideas dealing with reducing or eliminating taxes upon social security and pensions among our senior citizens. To placate his base, he is also proposing to increase earned tax credits to benefit lower income citizens. While he has called for the expansion of services to be taxed, he has called for a lower of the sales tax with the goal of broadening the tax base.
Article comments