Sands talks about ‘discounted’ optional flat tax

Tax CutsBy The Iowa Statesman


Last month, The Iowa Statesman reported on a number of bills being considered that would alter or amend Iowa’s individual income tax provisions. House Ways and Means Committee chairman Tom Sands (R-Wapello) issued a statement this week that one of those provisions moved out of committee.

House File 604, a successor bill to House Study Bill 215, was approved by the committee last week, and is now on the tentative debate calendar for the House. Sands said the bill provides a “discounted, optional flat-tax that gives Iowans a choice for a flatter and simpler income tax system” that will make Iowa more competitive with other states in the search for jobs and new businesses to locate in the state.

“Many Iowans at every income level will benefit from this plan, some from the simplicity aspect and others by the lower flat rate,” he said. “In addition, seniors that have worked hard all of their lives would be able to exempt their retirement income like pensions, 401-Ks, IRAs, and Social Security from income tax.”

If approved, HF 604 would allow Iowans to choose between filing under the current system with all of their deductions, or the new optional flat-tax system, based on which is better for their individual situations. Some people in each income bracket will be able to benefit from the new system, Sands said.

“No one will be hurt by this new option because everyone can choose what works best for them each year,” he said.

The rate for the discounted flat-tax will be 5 percent with a standard deduction more than three times higher than the current standard deduction. The current income tax rates range from 0.36 to 8.98 percent.

“The goal of the legislation is to keep more of Iowans’ hard earned money in their hands, which is the best economic stimulus I know of,” Sands said. “Retirees with all of their experience can be an invaluable asset for our communities and our state. This plan is all about growing the economy, creating jobs, and attracting more people to our great state. If that can be done, our economy will grow and the cost of government will be spread over a larger number of taxpayers, meaning everyone should be able to pay less. All Iowans will benefit.”

Iowans for Tax Reform has said it “supports the concept” of HF 604, but wants safeguards to ensure both income tax options would continue as long as Iowa has an income tax and that the complex tax code will continue to include taxpayers’ right to deduct all their federal income taxes on their Iowa return.

“There is grave danger that if Iowans are allowed the choice of two tax options, a future Legislature may be tempted to either (1) repeal the complex tax code option and force everyone into the flat tax even though it would raise taxes for a majority of Iowans or (2) keep the complex tax code option but raise taxes by repealing federal deductibility,” ITR said in its statement. “Iowans for Tax Relief will work to amend House File 604 to require that the flat tax option will continue only as long as both options remain available to all Iowa income taxpayers and full federal deductibility remains in the complex tax code option.”