I find it hard to believe that the very people who have increased the Iowa State budget by $1 billion in only two years are actually implementing a "middle class tax cut." This is going to come about through the repeal of the Federal Deductibility provision of Iowa tax code. For those not expert in tax issues - federal deductibility is subtracting from your Iowa taxable income the amount you already paid to the Federal government in income taxes. Repealing this deduction is a tax increase. Let me repeat: The repeal of a deduction is an increase. This is the largest deduction most Iowans have. As a result of repealing federal deductibility the State will collect almost $600 million in new revenues. Sounds like a tax increase to me.
The "middle class tax cut" Governor Culver and the Democrat Legislators propose following the repeal of federal deductibility is a minor reduction in the overall state income tax rates. This will result in tax savings of from $17 to about $50 for the very lowest income level workers, according to Senator Dvorsky in last Saturday's Press-Citizen. For families making over $120,000 he stated that their taxes will go up. Note that a family with two workers, each making $60,000 would fall into this category. They are "rich" and deserve to be taxed more according to Governor Culver and the Democrat Legislators. Over 450,000 Iowans fall into this "rich" category and will see their state taxes go up under this plan. Doesn't sound like a middle class tax cut to me.
This means many of us who work for the University of Iowa or Kirkwood Community College as administrators, doctors, or senior instructors - after many years and thousands of dollars in education and training, will be penalized for our success. This includes city, county, and school district workers who have reached the top of their profession after many years of dedication. You and your families will be penalized. It includes senior employees at ACT, Pearson, the Press-Citizen, or Proctor and Gamble, just to name a few others. It includes small business owners, the main economic engine of this country.
In practical terms, if federal deductibility is repealed, all Iowans will be paying taxes on money paid as taxes to the federal government. A tax on a tax simply isn't fair. For example, the average household in Johnson County pays over $13,000 in federal taxes, the 330th highest rate in the country. This is basically in the top 10 percent of all 3,112 counties in the U.S. Translation: We already pay a lot more federal taxes than almost everyone else in the country. If this change passes and Governor Culver signs it - we will pay taxes on the taxes we already paid. Get it? Pay Taxes on Taxes.
In particular this tax increase will affect small business owners. It is a huge increase on the very Iowans who work, who start businesses, and who create jobs. These are the people and employers on whom our state's economic recovery depends. These people will see their taxes increase by nearly 7 percent. That is not a "middle class tax cut." Additionally, federal deductibility is usually the largest state deduction for most renters, who don't have mortgage interest to deduct. It is the second largest deduction for most homeowners. This will affect all of us negatively. We will pay Taxes on Taxes.
At the same time elected officials in Iowa City, Coralville, and Johnson County are asking us to voluntarily agree to increase sales taxes on our families by 16 percent. That "only one penny" will result in almost $70 in additional sales taxes being paid by a worker who makes $15,000. These folks are already paying the "only 1 penny" SILO increase of $70 of two years ago. Additionally, the Iowa City Community School District is proposing a property tax increase of $70 per $200,000 house to balance their budget. This is on top of the recent Conservation Bond tax increase of only $50 on the average homeowner. When will it stop?
During a recent legislative forum, the Johnson County Legislators called me "goofy," and "tax paranoid" for disagreeing with them, for challenging their claim that the repeal of federal deductibility is a middle class tax cut. When does daring to have a difference of opinion with your elected officials make you "goofy?" When I read the paper, watch the news, and start adding all of these increases - the only goofy thing I see is my paycheck getting smaller and smaller. The only thing going down is the amount of money the government is leaving us to support our families. Funny, maybe we would be better off not working, not owning a home, not shopping, and not having families. Wonder where our elected officials will get the money for their expensive artwork and pork barrel programs then? Who will be left to pay taxes on taxes?
Call Governor Culver and the "goofy" Legislators from Johnson County who expect us to believe that repealing a deduction is a tax cut, and tell them that enough is enough. Stop increasing our taxes, stop spending our money foolishly.