Yesterday, Tuesday, February 13, Governor Reynolds’ released a summary of her tax reform package, calling it, “the most significant tax reform package in decades.”
Iowans for Tax Relief (ITR) is encouraged by the release of Governor Reynolds’ tax reform package. ITR President Chris Ingstad said, “We agree with many of the Governor’s stated objectives and believe this plan would improve several aspects of the Iowa tax code. We look forward to digging into the details, especially surrounding federal deductibility, talking with our members, and working with the Governor, Lt. Governor, and legislators to deliver tax relief for all Iowans.”
Major items touted in the Governor’s plan are:
- Reduction of the top individual income tax rate from 8.98% to 6.9% by 2023.
- Increase the income level for the top rate from the current $73,260 to $160,965 by 2023.
- Increase the standard deduction from $2,070 to $4,000 (single) and $5,090 to $8,000 (married).
- Business owners could deduct 25% of the federal Qualified Business Income Deduction from taxable Iowa income.
- An immediate increase in Section 179 expensing limits from $25,000 to $100,000.
- Collection of sales tax on online purchases.
- Elimination of the deduction of federal taxes from Iowa income.
- The use of targets or “triggers” to protect the economy in the event of a downturn or to accelerate tax cuts during economic growth.
ITR knows the best way to create economic growth in Iowa is to have lower rates for all, control spending, and reduce regulatory burdens.
Some questions in particular that we are asking are:
- What is the total tax relief provided to Iowans each year?
- How many Iowans may see an increase in their tax burden if federal deductibility is removed as proposed?
- What will the impact be on Iowans if the recently reduced federal tax rates increase as scheduled after 2025?
- Will the proposed revenue triggers have the potential to reduce rates even lower than the stated 6.90%?
- Could slower than expected revenue growth in future years lessen the rate reductions or would they be locked in?
- Which online sales will be taxed and how might those revenues be dedicated to income tax reductions?
- What is the reform plan for the corporate income tax and tax credits?
Ultimately the Governor’s tax reform proposal is the first step in a process that will certainly see the Iowa House and Senate weigh-in with their thoughts and likely plans of their own. ITR will continue to engage with elected officials and keep you, our members, informed of developments.