Lawmakers are offering mixed reactions to Governor Tom Vilsack’s tax reform plans. Yesterday, Vilsack called for cutting or completing eliminating the state taxes on pensions and Social Security income. And he suggested doing away with the state tax deduction for federal taxes paid. Vilsack would reduce the number of state income tax brackets to simplify Iowa’s tax system, too. House Speaker Christopher Rants, a republican from Sioux City, doubts you can do all of what Vilsack suggests without raising taxes on somebody. “If Iowa taxpayers give up their largest deduction, they should not pay a penalty for that. They should not see their rates, their effective tax rates go up,” Rants says. Rants says he’d like to do both — cut taxes for pensioners and simplify rates by getting rid of that deduction for federal income taxes, but Rants says he doesn’t see how the state could do it and keep collecting the same amount of taxes, which is one of Vilsack’s goals. But Senate Democratic Leader Michael Gronstal of Council Bluffs says democrats back their governor’s call for an end to that deduction for federal taxes paid.Gronstal says Iowa’s income tax rate is actually lower than Nebraska’s, for example, but the rate looks higher because most state-by-state comparisons do not take into account that deduction for federal taxes.
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