Public Poicy Institute says flat tax benefits rich

An eastern Iowa “think tank” says a flat tax proposal floating around the statehouse is weighted in favor of the rich. The Iowa Public Policy Institute says the three-and-a-half percent “flat tax” on income that’s being pushed by a key state Senator would mostly benefit the richest one percent of Iowans. Fisher says the report his group commissioned shows Iowans making less than $44,000 a year would get a tax break of about half a percent. But Iowans making $270,000 a year would get a nearly two percent tax cut — four times as much as the middle-income wage earners would receive. Senator Larry McKibben, a republican from Marshalltown, is pushing the flat tax, which would lower taxes by 500 million dollars, along with an increase in the state sales tax and the state tax on cigarettes so Iowans’ total tax savings would amount to about 250 million dollars. Fisher is critical of that tax shift because lower income Iowans would see their total state tax bill go up, while upper income Iowans will get an overall tax break. McKibben also proposes doing away with income taxes on pensions and Social Security. Fisher says that also benefits the wealthy. Fisher says only the wealthiest retireers, the top 30 percent, pay taxes on their Social Security income. The remaining 70 percent of senior Iowans do not pay income taxes on their Social Security benefits. McKibben argues something must be done to keep wealthy Iowans here once they reach retirement age, and Iowa is finding it more difficult to complete with lower tax states that appeal to those who’ve retired.