Thursday, April 06, 2006

Senate Dems Tax Plan (DOA)

Senate Dems Tax Plan (DOA)

Which do Republicans love more: the myth of federal deductibility, or the reality of regressivity?

"Senate Democrats unveiled an income tax cut for Iowans making less than $60,000 a year in a package that would also sharply reduce taxes for most who are getting some form of pension income.

'This proposal will, in essence, end the middle-class tax penalty,' said Senate Democratic Leader Michael Gronstal of Council Bluffs.

Elements of the plan include:

• Ending the ability to deduct federal tax payments when calculating state tax liability, a move that would bring a windfall of about $430 million a year to the state. Taxes would increase for anyone who makes $100,000 a year or more. Those making more than $250,000 a year would see a 38 percent increase.

• A roughly 10 percent income tax cut for those who make $60,000 a year or less.

• Exempting Social Security income from taxation, and exempting pension income for all who make $100,000 or less.

• Doubling the state's earned income tax credit to 13 percent of the federal credit.

The plan was offered as an alternative to a Republican-backed proposal calling for a $300 million phaseout of taxes on Social Security and other pension income.

Senate Republican Leader Stewart Iverson of Clarion rejected the proposal..."

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