The Iowa House voted Thursday to exempt the rebates from the federal stimulus package from state income taxes, but majority Democrats would not agree to create a state tax break to match a new federal tax break on business equipment and machinery. House Republican leader Christopher Rants of Sioux City, says equipment dealers will tell you the tax break would mean business expansion:

Rants says sixty-seven percent of their members will tell you that bonus depreciation schedule changes prompt investment decisions." But Democrats say a new state tax cut would break the budget. Majority Democrats also turned down a Republican proposal to give smaller companies new tax breaks designed to lure Microsoft expansion to Iowa. Phil Wise, a Democrat from Keokuk, says it’s the Democrats’ job to balance the budget.

Wise says, "It is fiscally irresponsible to move to an unbalanced budget in order to benefit the largest four-percent of businesses in the state of Iowa." Paul Shomshor, a Democrat from Council Bluffs, says Iowans should not have to pay state income tax on the upcoming individual federal tax rebates.

Shomshor says one of the reasons he’s in the legislature is to do things for the middles class, and he says exempting the federal payments is good for the middle class and good for Iowans. The federal rebates could run as high as $1,200.