Iowa lawmakers strike a deal on tax cuts. Here's what's in it.

cigaretteman

HR King
May 29, 2001
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She want tout this horrible regressive tax plan in her SOTU rebuttal? Sad:


Iowa will move to a 3.9% flat income tax rate under a compromise between legislative Republicans and Gov. Kim Reynolds that paves the way for the passage of a massive tax cut.

House and Senate lawmakers are set to vote on the compromise Thursday, which would send the bill to Reynolds' desk for her signature. The deal means the governor will have a new achievement to tout in a nationally-televised speech Tuesday, when she gives the Republican Party's rebuttal to President Joe Biden's State of the Union speech.

The bill would cut Iowa's income tax to a 3.9% flat rate for individuals by 2026. It would also exempt retirement income like 401(k)s, pensions and IRAs from state taxes and overhaul some of Iowa's corporate tax credits.

Along the way, the bill would eliminate Iowa's progressive income tax system, where wealthier Iowans pay higher rates than lower-income Iowans.

It represents a compromise between Republicans' competing plans. Reynolds and House Republicans had initially proposed a 4% flat tax rate by 2026, while Senate Republicans had called for 3.6% rate by 2027, with a mechanism for eventually zeroing out the income tax entirely.

Iowa's corporate rate will also be lowered under the proposal, while some corporate tax credits will see an overhaul.

The compromise does not include a proposal from the original Senate Republican plan to eliminate the one-cent local option sales taxes in individual communities and establish a one-cent statewide sales tax, some of which could then be used to pay for water quality and outdoor recreation projects.

Ten states had some form of flat income tax as of Jan. 1, 2021, according to the Federation of Tax Administrators.

Republicans' rapid agreement on a tax cut package this session presents a stark contrast to last year, when debates over tax policy negotiations over competing tax plans prolonged the Legislature in session into May — weeks after its projected end date.

Democrats had unsuccessfully proposed a separate plan that would double the state's earned income tax credit and increase the child and dependent care tax credit for those making less than $90,000 per year. Democrats have also pushed for raising Iowa's per-pupil spending on K12 education next year in place of cutting corporate taxes.

 

joelbc1

HR King
Gold Member
Sep 5, 2007
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you can’t always get what you want!
Well the Repubbers get their tax cuts including corporate tax rate cuts. Meanwhile, Minnesota ( Iowa’s northern border neighbor) has the healthiest economy in the MidWest region, and has one of the highest Corporate tax rates in the nation….has anyone in the Legislature noticed that Minnesota is home to several large international corporations? Plus, Minnesota has shittier (winter) weather than Iowa…. So what is their secret?
The $$ is gonna come from somewhere….
 
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ichawkeye

HR All-American
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Jan 11, 2003
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It is a mistake to not have a tax rate that increases as one is further away from poverty. It is also a mistake to reduce taxes based on a federal funding event that has temporarily improved Iowa's finances. It is a mistake to reduce Iowa tax revenue when Iowa has continually displayed the inability (or perhaps unwillingness) to fund schools at or above annual cost of living increases.

This is an unsustainable action that gives those currently involved something to brag about until the unsustainability becomes clear to all.
 

lucas80

HR King
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Jan 30, 2008
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It is a mistake to not have a tax rate that increases as one is further away from poverty. It is also a mistake to reduce taxes based on a federal funding event that has temporarily improved Iowa's finances. It is a mistake to reduce Iowa tax revenue when Iowa has continually displayed the inability (or perhaps unwillingness) to fund schools at or above annual cost of living increases.

This is an unsustainable action that gives those currently involved something to brag about until the unsustainability becomes clear to all.
Your mistake is thinking that Kimmie or anyone in the GOP controlled legislature is worried about Iowa's long term viability. Kimmie gets what she wants, a chance to brag about this on national TV in the hopes that it's her ticket out of this state.
 

NorthernHawkeye

HR Legend
Dec 23, 2007
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At what age does the tax break on retirement income start? I saw a proposal a few weeks back that said 55. Not sure if it was finalized that way.
 

Crafty Beaver

HR All-State
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Feb 18, 2004
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If poor people are required to pay a greater percentage of their income to the state in taxes than the wealthy, it is most certainly regressive and punitive.

LOL. They aren't. 3.9% flat means exactly that...everyone pays the same percentage. It's not regressive. And poor people will still pay less than the rich, since (as far as I'm aware) several of the low-income tax credits will still be around.

It's regressive relative to what we currently have, certainly.