Governor pushes and end for "federal deductibility" on Iowa taxes

The Governor’s top tax aide today touted Vilsack’s plan to dramaticallychange Iowa’s income taxes. Vilsack wants to erase “federal deductability”which gives Iowans a deduction for the federal income taxes they pay. Vilsack argues it makes Iowa’s income tax rates appear higher, when comparedto other states — none of which offer the deduction. Republicans say theyaren’t interested in the Governor’s plan, because it would raise income taxrates for Iowans who earn more than 75-thousand dollars. House RepublicanLeader Christopher Rants says the higher paid Iowans would leave the state if the income tax was raised.Senate Republican Leader Stewart Iverson says high-income Iowans are theones that are most needed because they invest and create jobs.Republican Governor Terry Branstad once sought to eliminate “federaldeductability,” too, but was shot down by republican legislators. Branstad,like Vilsack, argued it artificially inflates Iowa’s income tax rates whencompared with other states — making Iowa seem to be a “high tax” state.