President Obama and Senate Democrats have been trying to implement the Buffett rule, a minimum tax on millionaires, which would remedy the problem of millionaires being able to pay lower tax rates than middle class families. One state lawmaker in Iowa thinks his state needs its own version — the Branstad rule — after Gov. Terry Branstad (R-IA) was able to pay just $52 in state income taxes on his nearly $200,000 in income:
Gov. Terry Branstad’s $52 state income tax bill in 2011 is proof that fixes are needed in the tax system, Sen. Robert Hogg, D-Cedar Rapids said today. “Some people talk about nationally we need a Buffet rule, maybe in Iowa we need a Branstad rule,” said Hogg, who additionally noted that a person making between $30,000 to $40,000 a year can expect to pay somewhere around $1,000 or more in state income tax.
Branstad was able to pay such a low amount because Iowa is one of just six states in the country that allows residents to write off their federal income tax payments from the previous year on their current year’s tax return. So Branstad was able to apply his 2010 federal income tax payments — which were paid on the salary he received from his prior job as the president of Des Moines University — to this year’s state income tax bill.
Iowa loses $642 million annually due to this provision, nearly one quarter of its total income tax revenue. More than half of the benefit of the deduction goes to the richest 5 percent of Iowans, while 76 percent of the benefits go to the richest 20 percent. “States should take a hard look at eliminating, or at least capping, their deduction because of the impact this lopsided tax policy has on state budgets and tax fairness,” the Institute for Taxation and Economic Policy wrote. Branstad’s administration called his low tax bill an anomaly. (HT: CTJ)