DISCOUNTING EXAMPLES: Making certain Iowans want to stay, while attracting new residents and businesses to our state.

Our current proposal is to give you a 15% discount on your income, property and sales taxes. You'll keep more of your money and we'll grow Iowa's economy by keeping more of our residents and businesses. But with these discounts, we'll also attract new ones, creating jobs and growing our economy.

The more you keep, the less likely you will be to leave Iowa, taking your businesses with you. And the more residents and businesses in other states see how much Iowans are keeping, the more new residents and businesses we'll attract with our discounted taxes. In fact, this rewarding solution is very similar to the benefits you get when you go to Best Buy, Hy-Vee, Costco or any other discounter.

Read on if you would like information on our second proposal which would be an optional, discounted flat-tax for Iowans: file with all your current deductions, or with a new discounted flat-tax on just your EARNED income. The benefits of that proposal are shown in the examples below.

Assumption: Discounted Tax Reform becomes law in its proposed form with EARNED INCOME taxed at 5.32% and pensions, Social Security, interest, dividends, and capital gains becoming TAX-FREE under your new OPTION here in Iowa.

FARMERS will want to continue to file their state income taxes with all their current deductions until they retire and rent their property. When they do retire, they will want to file with their new OPTIONAL DISCOUNT because they will have NO EARNED income. Their income from their farm will now be pension, or investment income, and non-taxable under the option.

If the farmer makes $50,000 in his last year of farming and sells the farm for a $1,000,000 capital gain, then he will probably want to file under the DISCOUNTED OPTION. In other words, he should pay 5.32%, (without any deductions), of the $50,000 or $2,660 as his tax under the option, and keep all of his $1,000,000 capital gain, TAX-FREE. This way the state gets more tax revenue, too.

BUSINESS OWNERS will find the same option attractive. Let’s say that you make $100,000 per year from your business and you are selling it for a $1,500,000 gain. Most Iowans pay at the average rate of 4.5% after their deductions. If you file on this basis, adding your capital gain to your income, then you could owe at least 4.5% of $1,600,000 or $72,000. But if you file under the DISCOUNTED OPTION, you will pay $5,320, (5.32% without any deductions), of your $100,000 income for the final year, but you will keep your $1,500,000 capital gain, TAX-FREE. And it’s important to note that the state’s income also rises because they have gotten 5.32% of the $100,000 instead of the normal 4.5%.

HOURLY WAGE EARNERS will want to file with all their current deductions for mortgage interest and charitable contributions, etc., until they retire. Then when they are living off their pensions and Social Security, and any other income from investments they may have, they, too, will want to file under their new DISCOUNTED OPTION. They will pay 5.32% of their EARNED income. NO EARNED INCOME means NO TAX. Put it on the postcard and mail it in to the Iowa Department of Revenue & Finance.

TEACHERS will want to file with their deductions while they are still teaching. But they, too, will want to file under the DISCOUNTED OPTION once they retire and Iowa stops taxing their pensions.

ATTORNEYS and CPAs will likely want to file with all their deductions, saving and investing as much as they can for their retirements. But let's say that an attorney buys a piece of property close to his home and sells it when a new shopping mall gets developed nearby. And let's say that he typically makes $150,000.00 per year from his law practice. But his GAIN on the sale of the property is $500,000.00. If he normally pays taxes at 4.5% of his adjusted gross income, as most Iowans do, his capital gain could kick him into the highest bracket at 8.98%. Under that method his tax consequence would be $58,370.00 at 8.98% of his total income of $650,000 for the year. But, if he pays 5.32% on his EARNED income of $150,000.00 under his DISCOUNTED OPTION, he will wind up paying $7,980.00 and he will get to keep his $500,000 capital gain, TAX-FREE. AND, AGAIN, THE SAME WOULD BE TRUE IF YOU WERE SELLING YOUR BUSINESS.

ANYONE WHO WANTS TO SAVE AND INVEST FOR AN EARLY RETIREMENT:
Let's say that you work for a newspaper, and your wife has a good position, too. And let's say that you both saved and invested in your 401-Ks, but also in outside investments for 15 years before she stopped working. Let's further say that over the course of the next 20 years you are now EARNING $80,000.00 per year at the paper, but your investment income has reached $117,218.00 per year. The best option for you is to pay at 5.32% of your EARNED income without any deductions, which is $4,256.00 and keep your $117,218 of investment income TAX-FREE. Otherwise, if you continue filing as you always have, you would have to pay at least 4.5%, or $8,875.00 with your EARNED and INVESTMENT income combined.

Note that several things happen with the DISCOUNTED OPTION. First, everyone has an added incentive to save and invest knowing that, at some point, everything will be theirs to keep, TAX-FREE. And the point at which filing with your new DISCOUNT becomes more advantageous may come BEFORE you retire. That's for you to decide based on your saving habits and investing success. But the time will come when you can use the more rewarding solution.

Secondly, when you do get to the point where you file UNDER THE OPTION, YOU WILL NO LONGER HAVE RIDICULOUSLY COMPLICATED FORMS TO FILL OUT IN ORDER TO COMPLY. And you won't have to pay anyone to fill out the postcard-sized return for you.

Lastly, none of the people in our examples will leave Iowa when they can live here TAX-FREE. But Discounting also means that Iowa can begin to attract larger numbers of new Iowans and their businesses, growing the economy as you put more money in your pocket and as the state's tax revenues continue to rise, steadily.

Do you want more money for education? Discount taxes today. And remember:
When everyone benefits, everyone should support this rewarding solution.

BE AN IOWAN TODAY. SUPPORT DISCOUNTING.

Steve Forbes, Honorary Chairman
Kevin McLaughlin, President
BJ James-McLaughlin, VP, Director & Media Consultant
515-778-0047
www.iowansfordiscountedtaxes.org