A newly-elected Republican leader at the statehouse says the GOP is offering a deal to Democrats and Democrat Governor Tom Vilsack that she sees as the solution to the budget stalemate. Senate Co-Leader Mary Lundby, a Republican from Marion, says Republicans will agree to spend $30 million on teacher pay raises if Democrats agree to a $110 million reduction in taxes on Social Security and pension income. “That’s Iowa’s largest group of citizens and they’re also, politically, the largest group of voters,” Lundby says. “You reach a point in your life when your ability to additional money is limited…everything else is going up — groceries and real estate taxes and gasoline.” The plan Lundby outlined Friday for reporters would gradually erase state income taxes on Social Security benefits within five years, and raise the amount of pension income Iowans can receive without paying taxes. For example, today a single pensioner pays state taxes on any pension income that’s more than $6000. The GOP plan would raise that exemption level significantly, to $26,000. Democrats have been saying that such a tax cut would cripple the state’s ability to meet needs in the future because state tax revenue will decline, endangering the plan to boost teacher salaries, for example. Lundby rejects that. “The last time on the campaign trail the Democrats criticized (Republicans) for $800 million in tax cuts that crippled Iowa. We’re still alive. We had record growth last year,” Lundby says. “We haven’t been crippled by tax cuts and we won’t be crippled by the next tax cuts.” Legislative leaders will meet with Governor Vilsack next week to try to resolve their differences on the state budget, and Lundby predicts the legislature will wrap up its work in two weeks.
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