Political Action Update
February 3, 2006
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Political Action Update
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| Vol. 06-03 |
February 3, 2006 |
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Tax Cut Fever Grips Iowa House Seniors Earning up to $48,000 a Year Could Pay Nothing |
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In a debate that bore more resemblance to the bidding at an
auction than to a major legislative deliberation, the Iowa House of
Representatives, on January 31, passed HF 2045, a huge income tax cut
targeting Iowa seniors.
The opening bid—to exempt all Social Security and pension
income from Iowa income taxation—came from Republicans.
Democrats countered with their bid to eliminate all income
taxes for people over 65 years old whose incomes are below $32,000 for
singles or below $48,000 for married couples.
The final and winning bid was the decision, adopted on an 81-18
bipartisan vote, to simply pass both tax cuts. This exercise in tax-cut pandering
clearly signals that the 2006 election season has begun.
Legitimate concerns regarding the fairness, equity,
affordability and necessity of the measure were lost in the rush to
“send a message” to seniors. While
the actual cost of the final bill is a matter of speculation,
estimates run as high as $300 million per year when fully phased in by
2011. Eliminating Iowa income taxes on
all Social Security and pension income benefits only the wealthiest
retirees. According to a
2001 Iowa Department of Revenue study, fewer than 1 in 3 Iowans pay
any income tax at all on their Social Security.
That study also found that 81% of the benefits from eliminating
the tax on Social Security would go to households earning over $50,000
in retirement. Current Iowa law exempts at least
50% of all Social Security income from taxation.
Up to $6,000 in pension income for singles and $12,000 for
married couples is also exempt. If HF 2045 were to become law, a
married couple earning $48,000 per year would pay approximately $2,100
in Iowa income taxes. A
married couple, retired and over 65, would pay nothing. Claims that citizens over 65 years
old have paid taxes all their lives and have already “done their
share” ignore the fact that citizens of all ages benefit from good
schools, safe communities, and public services, like nursing home
care, for those in need of special assistance. Republicans, who initiated the tax cut debate, claim that tax cuts are necessary to keep older and wealthier Iowans from migrating to other states that don’t tax retirement income. Studies conducted by the Iowa Department of Revenue and the Fiscal Services Division of the Legislative Services Agency contradict those claims and show that the supposed exodus of large numbers of Iowans who are moving because of tax policies is a myth.
The bill now goes to the Iowa
Senate. How the bidding
proceeds in that chamber is uncertain. Contact
Your Senators Help stop this legislation.
Senators can be reached by calling: 515-281-3371. To contact a Senator by e-mail send your
message to: firstname.lastname@legis.state.ia.us. To contact your Senator by mail write: |
