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Governor Reynolds’ plan to cut income taxes and create a 4% flat rate received media attention across the state and nationwide.

The reform “will help the Hawkeye State keep up amid intensifying Midwest tax competition,” according to The Wall Street Journal Editorial Board. They added, “Gov. Reynolds made the crucial point in her Condition of the State speech last week, saying forgone tax dollars will be ‘spent every single day on main streets.’ That thinking has helped Iowa’s economy and competitiveness, and the state is setting a good example for others.”

Locally, the Des Moines Register addressed what a 4% flat tax would mean for Iowa. The Register article states, “the change would put Iowa’s income tax rate the fifth lowest of the 42 states that have an income tax.”

The Cedar Rapids Gazette wrote, “The plan would reduce state revenue by $226 million in the first year, and by $1.6 billion at full implementation, according to the state’s nonpartisan fiscal and legal analysis division. The current state budget — which funds things ranging from education to the justice system to state-run mental health institutions — is just more than $8 billion.” The Gazette added, “The governor’s staff insists that if state revenues and spending continue to grow at their recent average rates, the flat tax plan can be implemented without forcing reductions in state spending.”

What Critics are Saying:

In addition to the misguided rhetoric about the plan only benefiting the rich, big-government proponents are trying to spin a tale of woe that governments won’t be able to find a way to survive by letting you keep more of your money.

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The Truth:

The critics couldn’t be more wrong.

The governor’s tax reform proposal CUTS YOUR TAXES and leaves enough money for the state government to operate and continue to grow.

The Governor Reynolds tax bill is focused on the family budget, not the state budget or local government budgets. It is about the future of the state and the future of Iowa families. It will make more things possible for Iowans, not more things possible for government. 

By the end of the next fiscal year, the balance of the Taxpayer Relief Fund will be almost TWO BILLION DOLLARS. This indicates that Iowa has extracted far more taxes from Iowans than the state needs to operate.

There is a structural imbalance and disconnect between how state government collects revenue and how it spends. The gap between collecting and spending needs to close.

Governor Reynolds’ flat tax is an ambitious plan that will start to close that gap to help save Iowans money. It’s easy to understand, it’s easy for Iowans to understand their tax liability, and it makes it easier to continue to adjust that rate downward in the future.

Learn More About Local Governments:

Too many school districts, cities, and counties have ridden the wave of increased assessments to grow their budgets and increase property taxes. For example, one Iowa school district is collecting 90 percent more in property taxes than it did 10 years ago, while the number of students has remained the same. Visit ITRLocal.org to see if this is your community.

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