• About Us
  • Advertise
  • Contact Us
  • Privacy Policy
Tuesday, July 5, 2022
The Iowa Torch
  • Home
  • State Government
  • Federal Government
  • Local Government
  • Politics
  • Education
  • Opinion
No Result
View All Result
  • Home
  • State Government
  • Federal Government
  • Local Government
  • Politics
  • Education
  • Opinion
The Iowa Torch
The Iowa Torch
No Result
View All Result
Home Opinion

Hendrickson: Putting the Taxpayer First

John Hendrickson: Iowa is on the road to becoming a national pro-growth tax reform leader.

John HendricksonbyJohn Hendrickson
February 1, 2022
in Opinion
Reading Time: 4 mins read
Hendrickson: Putting the Taxpayer First

From a taxpayer perspective, the 2022 legislative session is off to a good start. Governor Kim Reynolds, in her Condition of the State address, outlined a pro-growth tax reform plan that calls for a flat 4 percent income tax by 2026. House Republicans have also introduced a tax reform plan that calls for a flat 4 percent tax rate by 2026. Iowa Senate Republicans have recently introduced a tax plan that calls for a 3.6 percent flat tax by 2027. All these plans are pro-growth and each would make Iowa more competitive. This year is shaping up to be a gold standard year for Iowa taxpayers. By 2027, Iowans should have an individual income tax that is at most 4 percent, if not lower.

RELATED POSTS

Ernst: Securing critical minerals is essential for America’s national security

Miller-Meeks: Holding the Chinese Communist Party accountable

Miller-Meeks: More than a high-class problem

All three proposals build on tax reforms that have been enacted since 2018. “Prior to 2018, Iowa spent years building a complicated tax code full of credits and exemptions because of individual and corporate tax rates among the highest in the country,”  stated Senate Majority Leader Jack Whitver. Each proposal would correct this problem by creating a more modern and competitive tax code.

Under the governor’s proposal, individual income tax cuts would “occur gradually over the next four years” so that the priorities of government are protected. Iowa’s progressive income tax brackets would be replaced by a 4 percent flat tax, and taxes on retirement income would be eliminated, adding up to taxpayer savings of $1.583 billion.

The corporate income tax rate would also be reduced under Governor Reynolds’ plan. The current top corporate tax rate is a high 9.8 percent and under the governor’s proposal the rate would be reduced until it reaches 5.5 percent. The path to reducing the tax rate is based off of corporate tax revenues and when they exceed $700 million in a given fiscal year, the surplus will simply be used to lower the rate.

ADVERTISEMENT

A look at the governor’s plan by the numbers is available here.

The House Republican plan mirrors the governor’s in several areas.  It includes eliminating taxes on retirement income and it also puts Iowa on a path to a 4 percent flat tax on individual income by 2026. The House plan proposes to spend money from the Taxpayer Relief Fund to offset tax rate reductions. Corporate tax rates are not part of the House proposal.

The Senate tax plan creates a pathway to a 3.6 percent flat tax on individual income by 2027. Regarding the corporate tax, the Senate would reduce the top corporate rate from 9.8 percent to 7.8 percent and create a two-bracket rate structure of 7.8 percent and 5.3 percent. Just as with the proposals from Governor Reynolds and the Iowa House, the Senate plan eliminates taxes on retirement income.

Under the Senate proposal the Taxpayer Relief Fund will be renamed the Individual Income Tax Elimination Fund, which will create a pathway for Iowa to eventually eliminate the income tax. The Taxpayer Relief Fund, which has a balance exceeding $1 billion right now and is predicted to grow to $2 billion by the end of the year, was established for the purpose of providing income tax relief.

A major difference among the three proposals is the Senate plan reforms the sales tax as well. Iowa’s state sales tax is currently 6 percent, and most communities have also implemented a 1 percent local option sales tax, effectively making the statewide sales tax rate 7 percent. The Senate’s proposal would switch that final penny from a local tax to a state tax, keeping the same effective statewide rate of 7 percent in place.

The sales tax tradeoff will do two things. First, it will fund the Natural Resources and Outdoor Recreation Trust Fund (IWILL), which was a constitutional amendment approved by Iowa voters. This fund is dedicated to water quality and natural resources and 3/8th of the new penny of statewide sales tax will be dedicated to this fund. Second, the state will then redistribute revenue back to local governments.

The Senate plan proposes additional reforms to business tax credits, and it calls for an interim committee in 2029 to review tax credits and consider options for further reform. It also proposes other tax reforms such as exempting National Guard income from the individual income tax.

Senator Dan Dawson, who chairs the Ways & Means Committee described the plan as creating a “vision” for Iowa. “In the end, the Senate Republicans have tried to produce a bill that creates a vision for Iowa. It creates a vision of having lower rates, it creates a vision of attracting more people to the state and it creates a vision of funding our priorities,” stated Senator Dawson.

Senator Dawson argues that the plan modernizes the tax code from both the income and sales tax perspective. “We talked about modernizing for the 21st century economy, this is the smartest way to go about our sales tax system by eliminating these 1,371 individual jurisdictions and going to a unified sales tax,” noted Senator Dawson.

Governor Reynolds and the legislature deserve credit for making tax reform a priority. It remains to be seen which aspects will be included in the final tax reform bill, but as of now it appears that Iowa taxpayers may be witnessing a historic year for income tax relief. Iowa is on the road to becoming a national pro-growth tax reform leader.

Tags: 2022 Iowa Legislative Session89th General Assemblycorporate income taxDan Dawsonincome taxIowa LegislatureIowa sales taxIowa tax policyJack WhitverKim Reynoldslocal option sales taxtax reform
ShareTweetShare
ADVERTISEMENT
Previous Post

Sparked by Pandemic Lockdowns, Iowa House Panel Approves Religious Liberty Bill

Next Post

Iowa Republicans and Iowa Democrats Release Precinct Caucus Locations

John Hendrickson

John Hendrickson

John Hendrickson is the Policy Director for TEF Iowa.

Related Posts

Schultz: Governor Highlights Successes in Western Iowa
State Government

Reynolds to ask Iowa Courts to reconsider recent abortion rulings

June 29, 2022
State Government

Post Roe, state elected officials pledge abortion debate in Iowa

June 25, 2022
Iowa Supreme Court rules there is no right to abortion in state constitution
State Government

Iowa Supreme Court rules there is no right to abortion in state constitution

June 17, 2022
Hendrickson & Williams: Governor Reynolds’ Tax Reform Ideas are Pro-Growth
State Government

Iowa to allocate $100M in federal funding for school safety

June 16, 2022
Politics

Several Republican incumbent lawmakers lose primaries

June 8, 2022
Hendrickson: Fiscal Conservatism Works
Opinion

Hendrickson: A pro-taxpayer budget

June 8, 2022
Next Post

Iowa Republicans and Iowa Democrats Release Precinct Caucus Locations

Iowa House Bill Limiting Presidential Executive Orders Advances

Sign-Up For Our Daily Updates

Get The Iowa Torch right in your inbox!

Please wait...

Thank you for signing up!

Recommended Articles

American Heart Association raises more than $310,000 at Central Iowa Heart Walk

American Heart Association raises more than $310,000 at Central Iowa Heart Walk

May 5, 2022
Hinson, Grassley Discuss $1.2 Trillion Infrastructure Package

Hinson, Grassley Discuss $1.2 Trillion Infrastructure Package

November 16, 2021
U.S. Rep. Dan Crenshaw, R-Texas, (on right) endorsed State Senator Zach Nunn, R-Bondurant, in the Republican primary in Iowa's 3rd Congressional District.

Dan Crenshaw endorses Zach Nunn in Iowa’s 3rd Congressional District race

April 6, 2022

Popular Stories

  • Schultz: Governor Highlights Successes in Western Iowa

    Reynolds to ask Iowa Courts to reconsider recent abortion rulings

    0 shares
    Share 0 Tweet 0
  • Iowa employers say attracting a quality workforce is a top priority

    0 shares
    Share 0 Tweet 0
  • Axne attacks Nunn in first campaign ad

    0 shares
    Share 0 Tweet 0
  • Several Republican incumbent lawmakers lose primaries

    0 shares
    Share 0 Tweet 0
  • Bill Gustoff Announces Campaign for Iowa House District 40

    0 shares
    Share 0 Tweet 0

The Iowa Torch

The Iowa Torch​ is a for-profit, news organization that focuses on political news as it relates to Iowans

Categories

  • Education
  • Federal Government
  • Iowa History
  • Local Government
  • News
  • Opinion
  • Politics
  • State Government
  • Uncategorized
  • Uncategorized

Newsletter

Please wait...

Thank you for signing up!

© 2022 The Iowa Torch, a publication of 4:15 Communications, LLC.

No Result
View All Result
  • Home
  • About Us
  • Advertise
  • Contact Us
  • State Government
  • Federal Government
  • Local Government
  • Politics
  • Education
  • Opinion

© 2022 The Iowa Torch, a publication of 4:15 Communications, LLC.