Late Wednesday evening, Iowa Senate Republicans debated and passed their tax reform plan, which will now be sent to the House for consideration. The Iowa Working Families Tax Relief Act would provide $1 billion a year in tax relief once fully phased in, through individual and corporate reforms. This proposal would repeal federal deductibility and lower rates. The top individual tax rate of 8.98 percent would be lowered to 6.3 percent and Iowa’s high corporate tax of 12 percent would be lowered to 7 percent. These lower rates will then be indexed to the rate of inflation in future years. Additionally, the proposal would reform and reduce Iowa’s complex system of business tax credits.
Thursday morning, the Iowa House advanced Governor Reynolds’ tax reform plan through sub-committee. This proposal would provide $1.7 billion in tax relief through 2023, focusing on reforms for individuals. The proposal would gradually phase out federal deductibility, lower individual income tax rates from 8.98 percent to 6.9 percent, and expand deductions for small business owners and farmers. Revenue triggers would be used to ensure state revenue increases before lowering rates.
This is great progress! Iowans for Tax Relief is supportive of both tax reform plans. They address Iowa’s burdensome and complex tax code differently but do deliver real tax relief. Each would lower income tax rates across all brackets and reduce the top individual rate from 8.98%, the fifth highest in the nation. Farmers and small business owners will benefit from increased deductions. Both proposals will let Iowans keep more of their money in their bank accounts.
The legislative session is scheduled to end in just six weeks. It is crucial a tax relief bill is passed by both chambers and signed by Governor Reynolds. Doing nothing will increase taxes!
In December Congress passed, and the President signed the Tax Cuts and Jobs Act lowering federal income taxes for a majority of Iowans. These taxpayers will likely see their state tax burden increase because of federal deductibility.
We applaud the Senate’s accomplishment and are encouraged by discussions in the House. It is important for Iowa legislators and Governor Reynolds to finish the job and provide tax relief by reforming the Iowa tax code this year.
Lowering tax rates and reducing spending is a formula that will lead to economic growth in Iowa. As legislation is considered at the Capitol in subcommittees, full committees, or on the floor of either Chamber, Iowans for Tax Relief will register for, against, or undecided on bills based on how the bill impacts Iowa taxpayers. Email email@example.com to share your opinion. We welcome your input.
Visit our website for a complete list of legislation ITR is tracking during this legislative session.