A governor committed to a certain policy will have his staff or a commission work out a plan, then push hard for its adoption in his annual address to state legislators. We’ve seen Governor Terry Branstad take that route in the past to support commercial property tax cuts or education reform.

A governor casting about for a re-election campaign issue may advocate some vague idea, then blame its inevitable defeat on his political opponents. Case in point: Branstad’s half-assed “plan” to allow higher earners to opt into a lower state income tax rate with fewer deductions.  

A few weeks ago, Branstad indicated that his staff were working on a plan to change Iowa’s income tax structure.

Branstad envisions a two-track state income tax system that would set up a new “flat or flatter” state income tax or let Iowans file their income taxes under the current system.

“But we have not got a specific proposal developed yet and hopefully by the time we unveil the budget in January we’ll be in a position to make a recommendation,” Branstad said. […]

“We don’t want to erode federal deductibility,” Branstad said, “and that’s why we’re saying: ‘Give ’em the option.'”

By giving taxpayers the option to file their income taxes under the current system with that major deduction or under a new system with lower and flatter rates, Branstad might avoid the firestorm he faced from his fellow Republicans in the late 1980s when he proposed doing away with that deduction.  Iowans for Tax Relief, founded and financed by a former Republican legislator, has long opposed getting rid of that deduction.

I wouldn’t even apply the “trial balloon” cliche, because most balloons have more substance than this plan. Operating two systems side by side would not only add complexity, it would fail to address the real problem with our state’s tax structure: it is regressive. In other words, Iowans near the bottom of the income scale face a higher overall tax burden.

Iowa Senate Ways and Means Committee Chair Joe Bolkcom rightly ridiculed the idea.

“The governor’s proposal seems to be a ‘what more can I do for wealthy Iowans?’ proposal and I look forward to discussing how we can make Iowa’s tax system more fair for working people,” Bolkcom says. “Right now people making less than $50,000 pay a higher percentage of their income in state and local taxes and we ought to be about fixing that.” […]

“The governor has proposed: ‘Pick your tax system,'” Bolkcom says. “And clearly the flat tax will provide significant benefits to the wealthiest Iowans and I think we should have one tax system that applies to everybody.”

According to Bolkcom, Branstad’s “pick your tax system” would “be much more complicated” for Iowa taxpayers to try to figure out.

No kidding.

As it happens, Branstad’s not even going to fight for his idea. This week he told Radio Iowa’s O.Kay Henderson,

“I’ll be real frank to say that with the present make-up of the senate and particularly with the present chairman of the Ways and Means Committee, I doubt that we’re going to see anything significant on the tax front this year,” Branstad said during an interview with Radio Iowa. […]

“I’m realistic enough to know that this issue of reducing the income tax burden for both individuals and corporations, making Iowa more competitive, is probably something that will have to be addressed in the 2015 session,” Branstad said.

Income tax reduction will be an issue in the 2014 campaign – both for legislators and in his own race according to Branstad.

“There’s significant differences between the parties on this issue, but I expect that Republicans will run on reforming and improving the tax structure, making us more competitive,” Branstad said. “We’ve already heard the Democrats say that they want a class warfare approach of raising taxes on some, reducing taxes on some other. I don’t think that’s a wise or good public policy for the state.”

Perhaps Branstad’s advisers came back to say his two-tier plan was unworkable, but I would guess he was never looking for anything more than a talking point about “reducing the income tax burden” and “making Iowa more competitive.” He wants to be re-elected to a sixth term with Republican majorities in both chambers of the legislature. (Just like the younger Branstad used to campaign for governor on reinstating the death penalty, then do little to make that happen once he was in office.)

I love how in Branstad’s world it is “class warfare” to reduce taxes for most Iowans, as State Senator Jack Hatch proposes. But it’s not “class warfare” to propose a system where wealthy Iowans could calculate their taxes two ways, then pick the lower number.

Let’s be clear. Iowans near the top of the income scale are not burdened by our current system. On the contrary, the wealthiest Iowans typically pay less in state and local taxes as a share of annual income than do middle-income or low-income Iowans.

Even looking at income taxes alone, the wealthiest Iowans rarely pay the official top tax rate of 8.98 percent. They benefit from a range of deductions for federal income tax payments, charitable gifts, contributions to relatives’ college education funds, and so on. Branstad himself has paid unbelievably low state income taxes in some years, despite reporting income that puts him in the top 1 percent for this state.

Please share any relevant thoughts in this thread.