DES MOINES, Iowa – On Wednesday, Gov. Kim Reynolds signed SF 619 into law. The legislation cuts taxes and invests significantly in mental health as well as foundational priorities like child care and housing. The legislation was a compromise brokered by Reynolds with the Iowa House and Iowa Senate to wrap up the 2021 legislative session.
“In Iowa we are cutting taxes and helping Iowans keep more of their hard earned money. Not only does this legislation reduce income and property taxes, it completely phases out the state’s inheritance tax,” she said in a released statement. “With this legislation, we also provide steady and reliable funding for our state’s mental health system while making significant investments in housing, workforce, and child care.”
Highlights of the bill include:
- Removal of triggers from the 2018 tax reform bill ensures income tax cuts for all Iowans will go into effect on January 1, 2023. With the removal of the triggers, the top tax rate drops from 8.53 percent to 6.5 percent. It also reduces the number of tax brackets from nine to four and eliminates federal income tax deductibility. It is projected to save taxpayers over $350 million.
- Increases the eligibility for the Child Care Tax Credits from families making $45k to $90k
- Exempts COVID-19 grant money and Paycheck Protection Plan loans from state income tax conforming with federal law This exempts all 2019 tax filers from any taxes on forgivable PPP funds. It will give back small business 2019 tax filers over $5 million.
- It phases out the state inheritance tax over five years that will save taxpayers nearly $100 million once fully implemented.
- Requires payment parity for mental health services provided via telehealth and in-person
- It couples Iowa tax law with federal bonus depreciation for qualified equipment and other capital assets purchased on or after January 1, 2021. It will save taxpayers nearly $75 million over five years.
- Increases workforce housing tax credits to $40 million for Fiscal Year 2022 and $35 million for the following years
- Phases out the mental health levy over two years, saving property taxpayers over $100 million.
“Today’s legislation ushers in a new era of growth and opportunity in Iowa,” Reynolds added. “But we are not done yet. Next year, I’ll be proposing additional income tax cuts as we continue to make Iowa the most attractive place in America to open a business, raise a family, and start a career.”
Iowa Senate Majority Leader Jack Whitver, R-Ankeny, who was present for the signing, released a statement responding to the bill signing.
“The signature of Governor Reynolds on SF 619 represents the culmination of years of work by Senate Republicans as we continue to keep our promise to Iowans to reduce their tax burden. Iowans pay some of the highest income and property taxes in the country and that burden will be reduced with SF 619. This bill is a one billion dollar tax cut over the next 8 years. Iowans will know for certain the next round of income tax cuts will be enacted. The mental health property tax levy will be eliminated over the next two years and more money will be put into the mental health system. Small businesses will be encouraged to invest and create more opportunities for Iowans by utilizing the bonus depreciation tax deduction. Finally, this bill eliminates the inheritance tax, so after a lifetime of paying taxes, Iowans are not taxed yet again,” he said. “I applaud the governor’s leadership on crafting this compromise and partnering with Senate Republicans to deliver major tax relief for working Iowans.”
The National Federation of Independent Businesses (NFIB) was also present at the bill signing.
“This key piece of legislation is a huge win for small business owners, many, who have been devastated by the COVID-19 pandemic,” Matt Everson, NFIB State Director in Iowa, said in a released statement. “This legislation will allow our small business owners to re-invest in their business, give employees raises, and hire new workers. In short, it ensures that Iowa’s economy can continue to grow. Today is a good day for all Iowans.”
State Rep. Ross Wilburn, D-Ames, the Iowa Democratic Party chairman, criticized the bill saying it doesn’t allocate enough funding for mental health.
“Our health care system in Iowa is in crisis and struggling to recover from the pandemic. We should focus on investing more money into mental health care to provide Iowans with the critical support so many still don’t have access to,” Wilburn added. “This new legislation also forces county and city governments to make tough funding decisions. It removes important funding promised to cities, counties and schools and takes away more than $150 million every year from these communities.”