Did you know the state of Iowa has a fund called the Taxpayer Relief Fund? It’s true, that’s the actual name. While we are fans of almost everything with “tax relief” in its name, that’s not even the best part. Right now, that Fund has a balance of $1.1 billion. But it gets better: by the end of the next fiscal year, the Taxpayer Relief Fund is projected to have an ending balance of $1.8 billion!
It’s important to note that dollars can only flow into the Taxpayer Relief Fund after the Cash Reserve Fund and Economic Emergency Fund (sometimes collectively referred to as Iowa’s “Rainy Day Funds”) have been statutorily filled. Both of those funds have met that requirement and hold a combined $800 million.
Several years of budgeting restraint and booming tax receipts have delivered large surpluses to Iowa, including this past year, when our General Fund finished with a $1.24 billion budget surplus. Governor Kim Reynolds and Republican legislative leaders are stating that tax reform will be a priority for the 2022 legislative session.
Lawmakers have yet to publicly release any tax reform proposals, but the large surplus presents a historic opportunity to return the money back to taxpayers through substantial and permanent rate reductions, rather than through a one-time credit or cash payout.
The legislature has a responsibility to return this money to the taxpayers—after all, it was their money to begin with, and the state took more than it needed. Any tax reform should ensure that all Iowans receive tax relief, instead of targeting it to certain classes of taxpayers.
In our competitive, global economy, tax rates matter. This year alone, Iowa was one of 15 states that passed income tax reforms. If Iowa’s leaders don’t continue to make progress in reducing our rates and making Iowa more competitive, other states will likely pass us by. Governor Reynolds and the Iowa legislature should carry on the good work they’ve begun and map out a path to continued rate reductions.
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