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Friday, January 17, 2020

Gov. Reynolds proposes path to 5.5% top income tax rate

In her Condition of the State address, Governor Kim Reynolds announced her plan to Build Tomorrow's Economy Today by reducing income and property taxes, while increasing Iowa's sales tax.

The Governor's proposal would:
  • Increase the state sales tax by 1-cent.
  • 3/8 of the proposed 1-cent sales tax increase would fund the Natural Resources and Outdoor Recreation Trust Fund.
  • Cut individual income taxes by 10%, on average, in 2021.
  • Further reduce the highest income tax rate 5.5 percent in 2023.
  • Reduce the number of tax brackets from nine to eight in 2021, and further reduce to four brackets in 2023.
  • Reduce property taxes by lowering the per capita county mental health levy from $47.28 to $12.50. Mental health would be primarily funded through the state's General Fund.
  • Repeal the water excise tax.
  • Exempt diapers and feminine hygiene products from sales tax.
According to the Tax Foundation, if these reforms were in effect today, Iowa's current State Business Tax Climate Index ranking of 42nd in the nation would improve to 37th. 

To be enacted, the Governor's plan would have to be passed by both the Iowa House and Senate. Visit the Governor's website to see more details of her Vision for Iowa

Legislator Reaction

According to Iowa Capital Dispatch and Radio Iowa, Republican leaders liked the Governor's overall message but were cautious about the details. 

Senate Majority Leader Jack Whitver said, “It’s definitely a bold plan that has a lot of different moving parts. To put together the moving parts is going to be difficult, but that’s why we’re here is to solve difficult issues.”

Senate President Charles Schneider said, “We’ll have to see what the numbers are when they come back. I think it’s a good starting point for us to look at how we can reduce our income tax rates and make our state more competitive.”

ITR Position

Tax rates matter, and Iowa has some of the highest income tax rates in the country.

Currently scheduled rate reductions can only be implemented if two economic triggers occur. It's imperative legislators improve the long timeline and high threshold for enacting the remainder of 2018's reforms. The Governor's proposal is one way to achieve this goal. ITR looks forward to being part of this discussion, and we welcome your input.

What Do You Say?

What do you think about the Governor's comprehensive tax plan? Use the link below to email the Governor and your legislators. 

Time to Cut the Red Tape Tax

ITR's Job Licensing Solutions Match the Governor's

It is no secret Iowa is the second most licensed state. This makes it more difficult and more expensive for Iowans to earn a living and fill high-demand jobs.

When Governor Reynolds spoke about professional licensing reform during the Condition of the State address, her solutions were identical to ITR's:

  • Job License Reviews
  • Criminal Justice Reform
  • Universal Recognition
  • Fee waivers for low-income workers

These reforms would encourage people not just to move into our great state, but to also make it easier to start careers and professions.

Rep. Bobby Kaufmann, Chair of the House State Government Committee, told listeners of Simon Conway's WHO Radio show, "If you are a good plumber in Nevada and move to Iowa, you shouldn't have to go back to school to learn what you are already an expert in. Regulation cost put predominantly on middle-class families is like a red-tape tax."

Session Opening Remarks from Leadership

"The ultimate goal is to ensure the people who work hard for their money are getting to keep more of it." - Senate Majority Leader Jack Whitver

Senate Majority Leader Jack Whitver
"We can continue to do more to simplify and make taxes lower, fairer, and more efficient. But the ultimate goal is to ensure the people who work hard for their money are getting to keep more of it.

We still have a long way to go in our race to be the best state in the country. We passed the largest tax cut in Iowa’s history. It was a huge reform package, and now that we are a few years into that plan, we are starting to see some of the results and benefits. And more needs to be done. We want to continue to reduce those rates to bring our state from the back of the pack to one of the states with the lowest rates."


Iowa Senate President Charles Schneider
"The more we can lower income taxes, the sooner Iowans will be able to pay off student loans, buy a home, start a family, save for their children’s education, or put aside money for retirement.

We know a state’s tax climate can attract people. It can also drive them away. According to the Tax Foundation, Iowa ranks 42nd in business tax climate. The income tax cut bill we passed two years ago has improved our ranking, and it will continue to improve as the bill phases in over time. Still, it is a barrier to growth and an area where we must improve."

Speaker of the Iowa House Rep. Pat Grassley
"Our reserve accounts are full … we have a healthy ending balance … we’ve made smart investments in priorities like K-12 schools, workforce training, and public safety … all while lessening the tax burden on hard-working Iowa families and small businesses."

House Majority Leader Matt Windschitl
"Let us strive to find new and ingenuitive ways to make Iowans freer. Free from burdensome government regulations. Free from an overly complex tax system. Free to raise their families and live their lives without the fear of government intrusion. Free to exercise their individual fundamental rights without government sanction or approval. Free to provide the best education possible for their children how they see fit. Free from the many hands of government reaching into their pocket for yet one more dollar of their hard-earned money." 

Property taxes for climate change. What's next?

In case you haven’t heard, Iowa City is proposing a 24-cent increase per $1,000 assessed in the emergency fund portion of their property tax levy in order to fight climate change. They intend to use this nearly $1 million in new revenue for reducing carbon emissions by offering incentives to property owners, planting trees, and providing educational programs.

An op-ed submitted by ITR President Chris Ingstad about this issue has been published by multiple news sources. Use one of the links below to read the article:

ITR 2020 Issue Survey

If you haven't already, please take a few minutes to complete this short, 10-question survey.
It’s easy for politicians to yield to noisy special interest groups when the taxpayer keeps quietly paying the bills.
Copyright © 2020 Iowans for Tax Relief, All rights reserved.

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