The Iowa Senate passed Senate File 619 on Monday night, a bill addressing tax reform, on a party-line vote. Republican Sen. Dawson called the bill big and bold.
Dawson said the session has dragged on in part due to economic uncertainty created by the COVID pandemic, but noted Iowa’s economy is “roaring back.”
“It’s easier to manage chaos than it is to manage prosperity,” Dawson said, reflecting on a quote he said he heard a couple of weeks earlier. “Folks, prosperity is a good problem to have.”
In total, Dawson said the bill delivers more than a $1 billion tax cut to Iowans. It accelerates income tax cuts and provides relief to property taxes while cutting taxes. It ensures all Iowans will be treated the same regardless of zip code when it comes to mental health and provides for telehealth parity. In addition, Dawson highlighted the increased childcare assistance provided to Iowa families. It also eases the burden on food banks and puts in place a four-year inheritance tax phase-out. Local government backfills will also be phased out over eight years. The bill includes PPP conformity as well.
“This is big, it’s bold and while other states limp out of this pandemic, Iowa is setting the example of accelerating out of this pandemic with policies that launch the state forward,” Dawson said.
Democrats raised issue with the phase-out of the backfill and claimed Republicans were breaking a promise to local governments.
“Today we’re keeping a promise and that’s a promise to the taxpayers of Iowa that we are going to cut taxes so that they no longer have to pay some of the highest rates in the country,” he said. “Why should we wait and delay a promise and ask Iowans to wait for permanent tax relief? Today here in this bill, we are keeping multiple promises.”
Dawson called some of the arguments against the bill “classic big government” arguments. He acknowledged that while the 2013 property tax backfill passed with some bipartisan support, but added that there were also legislators who did not support the legislation at the time.
Backfill dollars make up 1.43 percent of city budgets and 1.2 percent of county budgets, he said.
“To think that these entities can’t phase out the average percentage over a five- or eight-year period is laughable,” Dawson said.
He pointed to the “flood of federal money” coming into Iowa and compared stimulus dollars to the amount of backfill money certain cities receive every year:
Ames: $979,000 in backfill money – $15 million in stimulus
Cedar Falls: $696,000 in backfill money – $6.81 million in stimulus
Cedar Rapids: $4.1 million – $26 million
Council Bluffs: A little more than $2 million – $24.6 million
Davenport: $3.15 million – $39 million
Des Moines: $5.5 million – $94.5 million
Dubuque: $1.3 million – $27.4 million
Iowa City: $1.5 million – $17.3 million stimulus
Sioux City: $1.867 million – $43 million stimulus
Waterloo: $1.75 million – $31 million
West Des Moines: $3 million – $8.15 million
Dawson said asking cities and counties to phase out the backfill is a “fair exchange” for all of Iowa.
“The guiding principle for the Iowa Senate is now and will continue to be state government will work for taxpayers and not taxpayers work for state government,” he added.
When the state has surpluses, Dawson said the north star should always be broad-based tax reform.
“Government doesn’t always get theirs first,” he said. “Any division in this bill today in a normal legislative session would probably be the hallmark signature piece. We’ve made this something bigger, something better and something we can all take back to our constituents and say we did something fair, we did something right and we did something good.”
Democrat Senate leader, Sen. Zach Wahls, called the bill a “bait-and-switch.” He thanked President Joe Biden and congressional Democrats for the one-time dollars to help build Iowa back better and said the Republican Senate is taking advantage of one-time dollars to offset the cuts to cities and counties that will be phased out in perpetuity.
“So when your property taxes are higher in 2024 than they are today, thank your Republican state senator,” Wahls said.
Republican Senate Majority Leader, Sen. Jack Whitver, said the legislation will make Iowa more competitive.
“(On Monday), the Iowa Senate made Iowa more competitive. Reducing the top income tax rate to 6.5% means Iowa families will keep more of the money they earn. Lower-income tax rates make this state more attractive to small businesses and people looking for a new home,” Whitver said. “Phasing out the inheritance tax ends the unjust practice of taxing the dead. Eliminating the mental health levy finally provides actual property tax relief for Iowans. Iowans asked for tax relief and the Iowa Senate has answered those calls.”