Governor Vilsack says Iowa’s tax system is uncompetitive — primarily because of one tax mechanism. “Federal deductability” allows Iowans to deduct their federal tax bill before calculating their state income tax liability. Supporters say it ensures Iowans aren’t paying taxes on taxes. Critics like Governor Vilsack say no other state allows the practice and it messes up Iowa’s income tax rates. Vilsack says the legislature should eliminate federal deductability and significantly reduce income tax rates so out-of-staters get a clear picture of Iowa’s income taxes.
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