Income Tax Reform Needed
Iowa taxpayers are plagued with headaches every year as they prepare their income tax returns, thanks to our complex tax system. I have been advocating for tax reform and want to enact meaningful legislation that helps the taxpayer. This session, along with property tax reform, I am working hard to reform Iowa’s individual income tax system.
This week I cosponsored a bill that changes the tax code for the benefit of Iowans and enables hard-working taxpayers to keep more of their money. The proposed bill provides for a comprehensive overhaul of the Iowa income tax system giving Iowans a choice when paying their income taxes: either the current system or the new simplifed system. Compared to current law, the proposed plan provides an overall 5% reduction in income tax liability in the first year of enactment, an overall 10% reduction in liability in the second year, and an overall 15% reduction in liability in the third year and beyond.
On average, a taxpayer receiving a decrease under the new simplified plan would see an average tax reduction of $360 in tax year 2014 and $517 in tax year 2015. In realistic terms that money means a car payment, school clothes, or utility payments for Iowans and would greatly ease the burden of a tight family budget. The new simplified option available to taxpayers under the proposed legislation flattens the Iowa income tax brackets, eliminates federal deductibility, and gets rid of itemized deductions by replacing it with a higher standard deduction.
You might ask why this reform is needed. According to the recent report from the Tax Foundation located in Washington, DC, Tax Freedom Day in Iowa is on April 9th; it is the day when you as an Iowan earned enough money to pay its total tax bill for the year. To see a vivid, calendar-based illustration of the cost of government, Tax Freedom Day divides all federal, state, and local taxes by the nation’s income. This can be found at www.taxfoundation.org/taxfreedomday.
Tax Freedom Day is five days later than last year, due mainly to the fiscal cliff deal that raised federal taxes on individual income and payroll. Additionally, the Affordable Care Act’s investment tax and excise tax went into effect.
Please join me at one of my upcoming Urbandale forums with my good friend Representative John Forbes, sponsored by the
Great Urbandale Chamber Offices, 2900 Justin Drive, Urbandale on
Saturday April 27 10:30-12:00