Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

IOWA TAX CHANGES NEXT YEAR?

December 08, 2004

Governor Vilsack outlined an ambitious tax agenda for 2005 yesterday in a speech to reporters. The Governor's plan is still being drafted, but he said its basic elements will include:

- A reduction in the top individual rate in exchange for eliminating federal tax deductibility, and

- An extension of sales taxes to additional services (including accountants and engineers, but not lawyers) in exchange for a lower sales tax rate.

DEADLOCK = MOVEMENT?

The prospects for the Governors plan are uncertain, of course. The Iowa Senate is evenly split and the Republicans have a one-seat majority in the Iowa house. Normally that would portend an uneventful session; still, legislators are at least talking about cooperation, according to a story in the Des Moines Register.

   Legislative leaders from both parties agree with the 
   Democratic governor that the nearly equal numbers of 
   Republicans and Democrats in the new Legislature, 
   rather than ending up in gridlock, have a good chance 
   to forge bipartisan agreements setting a different 
   direction for the state.

   In the Senate, split 25-25, there is "an incredible 
   opportunity to find common ground," said Democratic 
   leader Michael Gronstal of Council Bluffs. Said 
   Republican Jeff Lamberti of Ankeny, who will share the 
   Senate president's post with Democrat Jack Kibbie of 
   Emmetsburg, "There's a lot of room for a significant 
   agenda."

If so, that will be quite a change from recent sessions, one of which ended up with the legislature and the Governor battling in the Iowa Supreme Court.

HEDGING AGAINST REPEAL OF FEDERAL TAX DEDUCTIBILITY

We aren't willing to handicap the odds of these changes passing. We do suggest that Iowans who will owe a large balance on their 2004 federal tax returns consider paying it before December 31, 2004. Paying deductible federal tax payments in the year they arise is often good strategy anyway; making the payments before year-end hedges against the possibility that Iowa will repeal its deduction for federal taxes effective January 1, 2005.

The Omaha World-Herald has additional coverage.

      Bookmark: del.icio.us • Digg • reddit