Average Joe and JoAnn Taxpayer are buying new furniture for their living room. They are happy because they were able to get a sofa, ottoman, love seat, end table, and chair for $2,000.

The following interaction occurs:

JoAnn and Joe go to cashier to pay and the following transaction is tallied;

Furniture: $2,000.00
Sales Tax 7%: $140.00
Sales Tax on 7% Sales Tax: $9.80

Total $2,149.80

Cashier says, “Due to a new change in the Iowa Legislature, I now have to charge you 7% sales tax on the 7% sales tax I just charged you.”

JoAnn replies in shock, “Are you kidding me. That makes no sense to pay a tax on a tax.”

Eliminating Federal Deductibility is exactly the same. You are paying a tax on money you earned, but only were able to use to pay a tax. It is utter nonsense.

Written by Ed Failor, Jr.
President, Iowans for Tax Relief