BRANSTAD TAKES BOTH SIDES ON TAX DEDUCTION IOWANS ARE ALLOWED FOR FEDERAL TAXES PAID
THE ISSUE:
Terry Branstad says he's running on his record but he can't seem to remember exactly where he stands on eliminating federal deductibility. He spent years arguing for its elimination but, once he announced his candidacy in September, he suddenly decided to change his mind.
Despite the fact that Governor Branstad was the first Governor to propose repealing federal deductibility, and even supported it during the Vilsack administration, Candidate Branstad now claims that he was the one who stopped it. Unfortunately for Branstad, the facts don't lie and his record on the issue is clear even though his memory night not be.
He claims we can't trust politicans. But, Terry Branstad, the consumate politician, is showing Iowans he's simply the one we can't trust.
THE FLIP:
When Terry Branstad announced he was resigning as President of Des Moines University to run for Governor again, he said that he had "fully maintained federal deductibility" calling it a "tax on a tax." Branstad is correct, federal deductibility was kept in place while he served but he left one
little important piece of the puzzle.
He has been on record for nearly two decades supporting the repeal of federal deductibility.
Terry Branstad, 10/16/09 - "And we fully maintained federal deductibility, which Iowans strongly support because they don't want a tax on a tax."
THE FLOP:
The record shows while he was Governor, Branstad tried to get rid of federal deductibility in 1987. He's and is on record for almost two decades, cited by multiple sources, taking that side.
In early 1987 Branstad "labeled his new revenue proposal 'income tax reform,' but for the typical Iowans it will also be a state income tax increase." (1)
After Branstad left office, the proposal was brought up by Governor Vilsack during the late 1990's and Branstad went on the record supporting it.(2, 3) Even in this decade Branstad was on the pro-elimination side of federal deductibility. (2, 4, 5).
This week, Branstad had to admit, yes, he did try to eliminate federal deductibility. Oops. But he still is misleading Iowans about his record by claiming that it was only Democrats who wanted to pass the legislation while ignoring the fact that he was the one who proposed it in the first place.
THE FACTS:
Relevant source material supporting Branstad's change of position on this issue is set out in its entirely below.
Kalona Rotary Club video, December 15, 2009. Property of Iowa Democratic Party.
FULL TRANSCRIPT: "Well theoretically, I'll test the theory. Okay, I tried it once. Way back when Democrats were in charge of the legislature they wanted to get rid of federal deductibility. And I said okay I will go along with you provide that you reduce the rates from 13% to 6%. They said, well no we want to get rid of federal deductibility, but we want to keep the rates up there.
"Well, I guess what I am telling you is you cannot trust the politicians. You cannot trust the politicians on that issue. Because what they will try to do is, is. They tried to do that at the last session. Well, they said that this is revenue neutral. Baloney!!! Because when the federal
taxes go up it is going to be a huge tax increase. Iowans didn't buy that. They don't want a tax on a tax. And they look at federal deductibility as at least a protection if their federal taxes go up, they are going to deduct it on their Iowa tax return and they will not be paying on that amount.
"And not every state does that, but I think Iowans feel really strong about that. I got that message and I understand that they feel that way. You know when I was governor I tried to work with the Democrats and I did and I had to for 10 years. And a lot of things had happened are ending up being compromised.
"But, I learned on the hard way about this on Federal Deductibility, you cannot deal with them because in the end they want to get rid of federal deductibility to raise taxes not to make it revenue neutral."
Sources:
- January 23, 1987 - The Des Moines Register. The Des Moines Register reported "Gov. Terry Branstad has labeled his new revenue proposal 'income tax reform,' but for the typical Iowans it will also be a state income tax increase. For 1987, the state will collect an additional $125.1 million from its 1.1 million income taxpayers, an average of about $111 per tax return. The heart of the proposal outlines by Branstad to the Legislature Thursday calls for repealing the state income tax deduction for federal income taxes paid." [Des Moines Register, 1/23/87]
- June 8, 2003 - The Des Moines Register. "A bill approved by lawmakers last week . would eliminate Iowans' ability to deduct federal income taxes on their state tax returns and would replace Iowa's nine-bracket system with three rates in 2007. The plan is intended to make the state more competitive. Iowa's income taxes currently appear higher than those of its neighbors because it is the only state in the region that has an unlimited deduction for payment of federal income taxes. 'This would simplify the efforts at marketing Iowa as a tax-competitive, pro-growth state,' said former Gov. Terry Branstad, a Republican. 'Having been governor and having tried to improve Iowa's competitive position, I am aware of the challenge. Iowa's taxes aren't as high as they appear.'" [Des Moines Register, 6/8/03]
- November 28, 1999 - Dubuque Telegraph-Herald. Iowans for Tax Relief Recalled Defeating Branstad Proposal to Repeal Federal Deductibility in 1987. The Telegraph Herald reported in 1999 that, "Recorded earlier last week, Vilsack's comments about wanting to eliminate federal deductibility on Iowa income tax returns caused a flurry of indignation at Iowans for Tax Relief. The group's chairman, David Stanley, who led the failed attempt in June to write more taxing controls into the Iowa Constitution, was quick to attack the governor's remarks. 'Gov. Vilsack should remember 1987, when Gov. (Terry) Branstad and Speaker (Donald) Avenson tried to repeal federal deductibility,' Stanley wrote." [Telegraph Herald, 11/28/99]
- March 26, 2009 - Iowa Independent "Branstad the First to Propose Ending Federal Deductibility." The Iowa Independent reported in March 2009 that, "Iowa has debated whether to end federal deductibility for decades. Former Gov. Terry Branstad, a Republican, first proposed ending the deduction in the 1980s." [Iowa Independent, 3/26/09]
- January 2, 2005 - The Des Moines Register. "Branstad pushed for eliminating federal deductibility when he was governor. The problem is 'there's a great amount of distrust among Iowa taxpayers that you're going to raise the effective rate,' he said." [Des Moines Register, 1/2/05]