Cutting Income Taxes Will Help Iowans
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Governor Kim Reynolds recently proposed a comprehensive tax plan to reduce income and property taxes while increasing the state's sales tax. She estimates raising the sales tax by one cent would increase Iowa's revenue by $540 million. Her plan would use those dollars to:
- Reduce income and property taxes
- Improve water quality and expand conservation and recreation programs
- Support Iowa's mental health system
Republican leaders in the legislature liked the Governor's overall message but were cautious about the details.
Would This Type of Plan Work?
Walt Rogers, TEF Iowa's Deputy Director, has been discussing the topic of income tax reform across the state recently. "When individuals and businesses have more money, they invest those dollars into the economy through spending, and the economy grows."
He encourages policymakers to look at all possible scenarios to find the best solution. Rogers said income tax reform plans could also implement spending controls, consider tax credit reforms, or even remove exemptions from services not currently subject to sales tax. "In Iowa, lawyer fees, engineering fees, lobbying services at the Capitol, and private charter flights are some of the services not currently taxed. If they were, it would broaden our sales tax base and increase revenue."
TEF Iowa recently released a report exploring four scenarios showing raising Iowa's sales tax and lowering income tax rates would increase the state's economic growth.
The Bottom Line - ITR's Position
ITR President Chris Ingstad said, "Taxpayers keeping more of their hard-earned dollars is a good thing and should be the goal of our elected officials. We appreciate the Governor mapping out a plan that lowers income tax rates to 5.5 percent while also removing one of the conditions to enact scheduled rate reductions."
ITR looks forward to the House and Senate weighing in with their ideas for tax reform. Research consistently shows reducing personal and corporate income taxes:
- Generates more consumer activity
- Increases business investment
- Creates more jobs
Iowa needs a better tax climate to make the state more competitive and attractive to new residents and businesses.
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A Closer Look at Property Taxes
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This week, two of ITR's organizational friends provided good info about your property taxes.
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Taxpayers Association of Central Iowa (TACI)
In an update from TACI, they shared interesting information about education funding:
- 55% of property taxes collected statewide fund local school districts
- K-12 education consumes 55% of Iowa's General Fund
- Some school districts propose infrastructure spending while cutting personnel
Is the current education funding model working? If not, what would a more ideal model look like?
TACI is hosting an event on February 19th to address these questions.
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Iowa Taxpayers Association (ITA)
Since 2015, Iowa's state government has been giving cities and counties property tax replacement dollars to make up for a rollback on commercial property tax valuations.
Yesterday, ITA released a study showing most of these local governments have outgrown the need for this replacement.
The report states, "Taking a portion of state tax collections and sending it to local governments does one of two things. The state is either collecting more tax than it needs for revenue or there are state services that are being shorted."
We encourage you to take a look at the full report with the link below.
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Stopping Medicaid Recipient Fraud
“It’s important to see that the taxpayers’ money is being spent responsibly. That assurance is lacking now.” - ITR's Victoria Sinclair at a subcommittee meeting
- Bill: SSB 3068
- Description: Public assistance oversight
- Status: Passed out of a Senate Labor and Business Relations subcommittee
- Bill: HF 2030
- Description: Public assistance verification of income eligibility
- Status: A House Human Resources subcommittee tabled action until hearing a presentation from the Department of Human Services and Department of Inspections and Appeals
Occupational Licensing
- Bill: SF 2114
- Description: Recognizes professional licenses and certifications from other states
- Status: Introduced, referred to Labor and Business Relations committee
Government Efficiency
- Bill: HF 2060
- Description: Limits the date of certain school bond elections to the regular school election date
- Status: Did not pass out of a House State Government subcommittee
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