Photo credit: Royalbroil (CC-By-SA 3.0)
The word “federal coupling” doesn’t mean much to many people. It seems like a boring word and boring concept. I admit it isn’t as exciting as fireworks or traffic cameras. But coupling is extremely important to many hardworking Iowans. It is affects farmers, teachers, and small business owners just to name a few. Coupling impacts the pocketbook of many Iowans and is crucial the economic health of the state of Iowa.
The federal tax code offers many tax deductions. For example, a teacher can deduct up to $250 from their income taxes for supplies they bought for their classroom with their personal money. For farmers and small business owners, the federal tax code allows a deduction of up to $500,000 from their income taxes for investments made in their business.
For example, when a business owner buys a new piece of equipment for $300,000 it allows them to grow their business and hire new workers. Under the federal tax code, they can deduct that entire investment from their taxes. This tax rule helps drive new investment in businesses, especially small businesses.
For years, the state of Iowa has passed “coupling” which means we join our state tax code with the federal tax code. This provides the same deductions on your state tax that the federal government gives on your federal tax.
Throughout 2015, many Iowans assumed that the legislature would continue to couple with the federal government. Teachers bought supplies out of their own pocket. Farmers invested in new equipment. Small businesses invested in the growth of their business.
After five weeks in the legislative session, it looks like “coupling” may not happen. It seems small business owners will not get the state tax deduction for their investment. For a business that invested $300,000 on a piece of equipment, that would mean a tax increase of over $20,000!
By Iowa not coupling with the federal government, it would mean an effective tax increase on Iowans of almost $90 million. This would be devastating to many families, small businesses and the Iowa economy.
I personally believe we should continue to couple and make coupling permanent. It is fair to have a debate on whether we couple in the future. But it is not fair to pull the rug on the people who assumed normalcy from the legislature and made investments before the end of 2015.
We must pass coupling and I will continue to work to make sure it gets done this year.