There were the loaves and fishes, the immaculate conception, and the immaculate reception.
“Do you believe in miracles?” Al Michaels asked as the U.S. hockey team beat the Soviets in the 1980 Olympics. “Yes!”
That’s especially true if you’re a Republican state lawmaker who wants to eliminate the income tax. Sen. Dan Dawson, R-Council Bluffs, the chair of the Ways and Means Committee, has crafted legislation that would, over time, do just that.
The plan would reduce the state income tax rate to a flat 3.65% in 2027. In the first couple of years, the elimination plan is less aggressive than a tax plan floated by Gov. Kim Reynolds, which would retroactively drop this year’s tax rate to 3.65% and cut it to 3.5% next year.
Reynolds’ plan would result in tax relief, and lost revenue, to the tune of $3.8 billion over five years. That’s a chunk of change.
Eliminating the income tax means axing nearly half of general fund revenues. But math is for the non-believers. It’s just loaves and fishes, folks. And fat cats will get the biggest servings from the miracle buffet.
First, Republicans will continue lowballing the state budget while socking away surpluses. In the governor’s general fund budget for Fiscal Year 2025, Reynolds could legally spend $9.7 billion but, will, instead, spend $8.9 billion. When the dust settles, according to the Legislative Services Agency, her budget will result in a $972.9 million surplus.
The current budget year, which ends in June, is projected to result in a $1.7 billion surplus. In 2023, the surplus was just over $1.8 billion.
A hefty portion of the surplus flows into the Taxpayer Relief Fund, which is projected to grow to nearly $3.9 billion in FY 2025. That’s money Republicans plan to use to cover the budget hole blown open by tax cuts, at least initially.
If you like funds, you’ll love the Senate bill. Some money from the Taxpayer Relief Fund will get dumped into what’s called the “Iowa Taxpayer Relief Trust Fund,” which will be invested. Then, 5% of the trust fund would get shoveled into the new “Income Tax Elimination Fund.” That will be used to fill the gap created by eliminating the income tax. Cross your fingers, and hope the economy doesn’t nose dive.
Whether the full Senate, House and governor are down with this Rube Goldberg machine and its pipes, buckets and funds, remains to be seen.
But the clear thread running through all these plans is the state must keep undercutting spending on a long list of priorities.
The never-ending thirst for tax cuts means, for instance, the state can’t extend postpartum care under Medicaid without kicking hundreds of people out of the program. That keeps the change “revenue neutral,” while we sit on a mountain of surplus revenue.
Mental health, public schools, universities, state parks, environmental protection and other services may get small budget increases. But after all the surplusing, funding has largely stagnated. But we surely will find billions to pay for private school scholarships.
This is serious stuff. Whatever tax structure we end up with likely will be permanent, even if political winds ever shift. Speaking of miracles.
(319) 398-8262; todd.dorman@thegazette.com
www.thegazette.com
“Do you believe in miracles?” Al Michaels asked as the U.S. hockey team beat the Soviets in the 1980 Olympics. “Yes!”
That’s especially true if you’re a Republican state lawmaker who wants to eliminate the income tax. Sen. Dan Dawson, R-Council Bluffs, the chair of the Ways and Means Committee, has crafted legislation that would, over time, do just that.
The plan would reduce the state income tax rate to a flat 3.65% in 2027. In the first couple of years, the elimination plan is less aggressive than a tax plan floated by Gov. Kim Reynolds, which would retroactively drop this year’s tax rate to 3.65% and cut it to 3.5% next year.
Reynolds’ plan would result in tax relief, and lost revenue, to the tune of $3.8 billion over five years. That’s a chunk of change.
Eliminating the income tax means axing nearly half of general fund revenues. But math is for the non-believers. It’s just loaves and fishes, folks. And fat cats will get the biggest servings from the miracle buffet.
First, Republicans will continue lowballing the state budget while socking away surpluses. In the governor’s general fund budget for Fiscal Year 2025, Reynolds could legally spend $9.7 billion but, will, instead, spend $8.9 billion. When the dust settles, according to the Legislative Services Agency, her budget will result in a $972.9 million surplus.
The current budget year, which ends in June, is projected to result in a $1.7 billion surplus. In 2023, the surplus was just over $1.8 billion.
A hefty portion of the surplus flows into the Taxpayer Relief Fund, which is projected to grow to nearly $3.9 billion in FY 2025. That’s money Republicans plan to use to cover the budget hole blown open by tax cuts, at least initially.
If you like funds, you’ll love the Senate bill. Some money from the Taxpayer Relief Fund will get dumped into what’s called the “Iowa Taxpayer Relief Trust Fund,” which will be invested. Then, 5% of the trust fund would get shoveled into the new “Income Tax Elimination Fund.” That will be used to fill the gap created by eliminating the income tax. Cross your fingers, and hope the economy doesn’t nose dive.
Whether the full Senate, House and governor are down with this Rube Goldberg machine and its pipes, buckets and funds, remains to be seen.
But the clear thread running through all these plans is the state must keep undercutting spending on a long list of priorities.
The never-ending thirst for tax cuts means, for instance, the state can’t extend postpartum care under Medicaid without kicking hundreds of people out of the program. That keeps the change “revenue neutral,” while we sit on a mountain of surplus revenue.
Mental health, public schools, universities, state parks, environmental protection and other services may get small budget increases. But after all the surplusing, funding has largely stagnated. But we surely will find billions to pay for private school scholarships.
This is serious stuff. Whatever tax structure we end up with likely will be permanent, even if political winds ever shift. Speaking of miracles.
(319) 398-8262; todd.dorman@thegazette.com
Opinion: Tax math is strictly for non-believers in Iowa
State Rep. Bobby Kaufmann, R-Wilton, and state Sen. Dan Dawson, R-Council Bluffs, speak with reporters Thursday, Feb. 1, 2024, at …
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