Governor Tom Vilsack this (Monday) morning indicated he’ll back one tax proposal republicans seek, but he has big concerns about another tax idea that’s won the backing of both republicans and democrats in the House. Vilsack says the republican idea of enacting tax credits for businesses that create new jobs is an off-shoot of a state progarm that already exists. Vilsack says the state’s existing “New Jobs and Income” program gives tax credits to businesses that make major expansions and create new, high-paying jobs with good benefits. He says it’s working, and it’s a good idea to expand the program. But Vilsack’s less enamored with another tax idea that would let 100 Iowa cities that are within five miles of a neighboring state to erase state income taxes for city residents. The governor says the problem is those cities would have to raise other taxes, and that would hurt the retail sector. Vilsack says for example, car dealers might not be able to compete with dealers outside of the city limits if the local sales tax were raised to replace the lost state income tax money. “I have a lot of concerns about that idea,” Vilsack says. The governor says if legislators want to address the tax competitiveness issue, it would be better to get rid of the deduction on state taxes for federal income taxes paid, because it makes Iowa’s income taxes look higher than they actually are.
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