Democrats may mount late tax reform move

The package likely would include eliminating federal deductibility as a way to simplify and lower Iowa's income tax rates. Gronstal said any tax code rewrite would be “revenue neutral” to state government but could require wealthier Iowans – possibly making $200,000 a year or more – to pay more while most Iowans would see their taxes go down or hold steady.

Gov. Chet Culver has indicated he would support repealing federal deductibility as part of a comprehensive reform effort to make Iowa's tax system fairer and more competitive by streamlining and lowering state income tax rates.

Minority GOP lawmakers, Muscatine-based Iowans for Tax Relief and other supporters of maintaining the option for taxpayers to deduct their federal taxes on their personal income tax returns promised to "fight tooth and nail" against any attempted repeal of federal deductibility.

Gronstal said lawmakers also are looking separately at revamping some tax credit programs that lack accountability and may not be the best use of state resources given the current deteriorating budget situation.

Ed Wallace, leader o Iowa Taxpayers Association, said he hopes lawmakers will take a wholistic approach when considering changes in areas such as research and development tax credits that aid a number of business activities, although he conceded “I think everything's on the table.”