• About Us
  • Advertise
  • Contact Us
  • Privacy Policy
Friday, June 9, 2023
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: Governor Reynolds and Iowa Legislature deliver for taxpayers

John Hendrickson: Iowa is becoming a national leader on state tax policy. Our state’s progress is a story worth sharing.

John HendricksonbyJohn Hendrickson
February 28, 2022
in Opinion
Reading Time: 3 mins read
Hendrickson: Fiscal Conservatism Works

Last week the Iowa legislature passed a historic tax reform measure. Going into the 2022 legislative session Governor Kim Reynolds and the Republican-led legislature made tax reform a priority. The tax relief bill passed by both chambers phases in a 3.9 percent flat rate for individual income tax by 2026, a major reduction from today’s top marginal rate of 8.53 percent. Beginning next year, Iowans will no longer pay taxes on retirement income.  And the reforms will also pare down Iowa’s corporate tax credits while lowering our top corporate tax rate of 9.8 percent to a flat 5.5 percent.

RELATED POSTS

Feenstra: Protecting Iowa corn growers through the USMCA

Miller-Meeks: Addressing America’s debt crisis

Hendrickson: Failed trade policy benefits China

All taxpayers in Iowa will see tax relief in this package of tax cuts; Senate Majority Leader Jack Whitver estimates this will save Iowans an average of $1,326 on their taxes on an annual basis.  This is real money and Iowans are looking forward to an improved tax code.  An  ITR Foundation poll released this week shows 57 percent of Iowans support a new, low flat tax, while only 24 percent of Iowans oppose the  change.

One of the major economic lessons from the past few years can be gleaned from the population changes in high and low tax states. States with low, or even no income taxes, are gaining population and creating more economic growth.  Conversely, states with high tax rates and a penchant for government spending are losing population and seeing poor economic growth.

Just how significant are these reforms? A brief examination of Iowa’s income tax history will demonstrate the magnitude of this victory for taxpayers. In 1934, the first income tax (and sales tax, for that matter) was levied in Iowa to provide property tax relief. The rates in 1934 ranged from 1 to 5 percent, spread over five tax brackets. The corporate tax was introduced at 2 percent that same year, and eventually grew to become the highest corporate tax rate in the nation at 12 percent.

Individual income tax rates continued to increase until they reached a high point of 9.98 percent in 1987. In 1998 a 10 percent across-the-board rate cut brought the top rate down to 8.98 percent with nine tax brackets.

ADVERTISEMENT

During her first year in office (2018), Governor Reynolds made tax reform a priority and the legislature responded by passing, at the time, the largest tax cut in Iowa history. The individual income tax still had nine brackets, but the top rate was immediately lowered to 8.53 percent, with additional cuts planned, subject to future revenue triggers.  Iowa’s 12 percent corporate income tax rate was reduced to 9.8 percent in 2021 as part of those changes, along with a modernization of Iowa’s sales and use tax.

In 2021, the legislature passed another tax reform measure, which not only phased-out the obsolete inheritance tax, but it also repealed the revenue triggers which had been established in the 2018 law to guide further individual income tax rate reductions. By repealing the triggers in 2021 the top rate would be lowered to 6.5 percent in 2023.

While the reforms passed in 2018 and 2021 were great steps in the right direction, this year’s set of income tax reforms dwarfs them.  Under the new tax reform measure passed by the legislature this week, individual income tax rates will be reduced as follows:

  • 6 percent (2023)
  • 5.7 percent (2024)
  • 4.82 percent (2025)
  • 3.9 percent (2026)

In 2026 the individual reforms will be complete with all Iowans paying a flat, 3.9 percent income tax.  And of course, the aforementioned exemption on retirement income begins next year.

The path to corporate rate reduction is slightly different.   In addition to reducing the amount of tax credits that can be refunded to a corporate taxpayer, the top rate corporations pay will be reduced as corporate tax revenues grow.  This ratcheting down will be complete once a flat rate of 5.5 percent is reached.

A critical part of Iowa’s successful tax reform story is often forgotten. The reason why Governor Reynolds and the Republican legislature have been able to enact meaningful pro-growth tax reform since 2018 is because they have adhered to prudent budgeting. By practicing fiscal conservatism and keeping spending growth restrained, tax reform was made possible. “So how did we get there? We stuck to conservative budgeting practices,” Governor Reynolds said in addressing a room full of Iowans for Tax Relief and NFIB members just this week. “There is nothing more vital than seizing the opportunity to return taxpayer dollars back to Iowans.”

It’s no surprise that Governor Reynolds was chosen to give the GOP response to President Biden’s State of the Union speech next week.  In addition to being an example of how conservative leadership works, Iowa is becoming a national leader on state tax policy. Our state’s progress is a story worth sharing.

Continue Reading
Tags: 2022 Iowa Legislative Session89th General Assemblycorporate income taxindividual income taxIowa tax policyKim Reynoldstax cuts
ShareTweetShare
ADVERTISEMENT
Previous Post

Grassley, Ernst respond to nomination of Ketanji Brown Jackson to Supreme Court

Next Post

Former U.S. Rep. Young to Run for Iowa House District 28

John Hendrickson

John Hendrickson

John Hendrickson is the Policy Director for TEF Iowa.

Related Posts

boy in green shirt
Education

Iowa families apply for education savings accounts in droves

June 5, 2023
State Government

Iowa increases penalties for human trafficking

June 1, 2023
Reynolds announces $5M investment to help boost food bank capacity
State Government

Reynolds announces $5M investment to help boost food bank capacity

June 1, 2023
Iowa’s school choice program launches with start of application process
Education

Iowa’s school choice program launches with start of application process

May 31, 2023
selective focus photography of a barber
Opinion

Hendrickson & Timmons: Making Iowa more competitive through occupational licensing reform

May 22, 2023
Iowa House approves 2.5 percent funding increase for school districts
Opinion

Hendrickson: Iowa is at the forefront of conservative budgeting

May 17, 2023
Next Post
Former U.S. Rep. Young to Run for Iowa House District 28

Former U.S. Rep. Young to Run for Iowa House District 28

Reynolds orders IABD to remove Russian-produced alcohol from purchase list

Reynolds orders IABD to remove Russian-produced alcohol from purchase list

Sign-Up For Our Daily Updates

Get The Iowa Torch right in your inbox!

Please wait...

Thank you for signing up!

Recommended Articles

Iowa House Passes Universal Parent-Taught Driver’s Education

April 14, 2021
Iowa Dept. of Public Health Says Schools Should Treat COVID-19 Like Other Childhood Diseases

Iowa Dept. of Public Health Says Schools Should Treat COVID-19 Like Other Childhood Diseases

May 14, 2021
Grassley: Biden’s Bloated Budget

Biden Administration Releases Vaccine Mandate for Employers, Health Care Workers

November 5, 2021

Popular Stories

  • blue and red freight truck on road

    Attorney General Bird challenges California’s truck ban

    0 shares
    Share 0 Tweet 0
  • Iowa families apply for education savings accounts in droves

    0 shares
    Share 0 Tweet 0
  • Ramaswamy campaign announces Matt Schultz as Iowa co-chairman

    0 shares
    Share 0 Tweet 0
  • Iowa Senate Democrats select Pam Jochum as leader, replace Zach Wahls

    0 shares
    Share 0 Tweet 0
  • Miller-Meeks: Addressing America’s debt crisis

    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.