JOHNSTON - Legislative Democrats still are hoping to fashion a tax reform package that provides relief for middle-class families, a top Senate Democrat said Friday.

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said behind-the-scenes work in proceeding on a plan aimed at reducing taxes "pretty much across the board" for up to 70 percent of state income taxpayers.

"I think there's a real shot," he said. "Now is the time to do it."

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.

"It's not about raising revenues to take care of our budget problem," he said. "It's a shift. We believe we can come up with something where 70 percent of all Iowans are either staying the same or getting a tax cut."

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 of 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."

Contact Rod Boshart

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