Sen. Jack Hatch proposes middle-class tax cut

DES MOINES – Democratic gubernatorial candidate Jack Hatch unveiled a tax-cut plan Wednesday targeting relief to middle-class Iowans with families who are working two or more jobs to make ends meet.

Hatch, a state senator from Des Moines, proposed eliminating federal deductibility by 2015, reducing state income taxes from eight to four brackets, boosting the per-child tax credit from $40 to $500, exempting the first $1,000 in secondary earner's wages, and raising the filing thresholds for individuals and families.

“Close to 90 percent of all Iowans will have a chance to have a tax cut under our plan,” Hatch told a Statehouse news conference. Iowa earning more than $200,000 annually would see their tax liabilities increase while a family earning between $80,000 and $90,000 annually would see their tax liability drop an average of $1,013, he said.

Hatch said his plan aims to make Iowa's income tax system more progressive and assist families with children and dual incomes, not provide a tax cut to everybody.

“We want to reward parents who in the past have worked harder, longer but for less and need a break. This proposal will make that break happen,” he said.

“One of the most important things a governor can do for families is to help them keep a little more of what they've earned,” he added.

Hatch's proposed changes are estimated to reduce the states' ending balance by $309.1 million in tax year 2014 and $304.2 million in tax year 2015 once Iowa taxpayers are no longer able to deduct their federal tax liabilities on their state returns. He said federal deductibility is outdated, complicates the system, and hurts Iowa's competitive position by making the state's tax rates appear to be artificially high in national comparisons.

Unlike previous attempts to eliminate federal deductibility, Hatch does not seek to make his plan revenue neutral and would only slightly lower the top state income rate from 8.98 percent to 8.8 percent.

“The very wealthiest are going to be paying higher. The middle class are going to get a big break.

That's what I think this state needs,” Hatch told reporters.

“The higher income taxpayers can afford to pay more. This is to get real progressivity in our tax system,” he added.

The Des Moines Democrat said 1,033,000 Iowans would see their taxes go down under his plan.

Under his plan, the filing threshold for single filers under age 65 would be raised from $9,000 to $20,000, while the threshold for all other filers under age 65 would increase from $13,500 to $24,500. The current eight rates and brackets would be reduced to four with rates of 3 percent, 4 percent, 6.2 percent and 8.8 percent at various income thresholds.

Hatch said the focus of the 2013 legislative session was to provide tax relief for commercial property taxpayers. He wants to shift that to providing significant relief for families struggling to raise children and work multiple jobs.

“I believe middle-class families need a break more than I believe large corporate interests need a break,” he said. “I think this proposal is one of the most significant tax cuts to middle-class families that I've seen in my 21 years as a state legislator.”

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