The Iowa Senate passed Senate File 576 with unanimous support on Wednesday. The bill removes the triggers from the 2018 tax reform bill and phases out the inheritance tax here in Iowa.
Republican State Sen. Dan Dawson called the triggers “short-sighted” and noted the inheritance tax is “one of the most morbid tax policies” in Iowa Code.
He argued that now is the time for Iowa to make these beneficial changes, saying the state has the financial capacity to deal with the priorities.
And while some concerns may linger due to the federal government’s recent COVID relief package, which prohibits states from using the funds to directly or indirectly cut taxes through 2024, Dawson said that is an afront to states rights and if the federal government goes down that path he predicts the states will see the feds in court.
Democrat Sen. Pam Jochum did not support the bill in committee, but she spoke in favor of it on the floor. She noted that Democrats have wanted to get rid of federal deductibility for a long time. She also said it is her belief that Iowa will hit the triggers before 2024, which helps her support that portion of the bill.
And then Jochum spoke at length about the inheritance tax. She referenced information from the Department of Revenue. It was a five-year study and it revealed that the majority of Iowans inheriting money from someone who died earns less than $80,000 a year.
The inheritance tax, she said, clearly impacts middle-class families more often than not.
She referenced a conversation she had with an estate lawyer a few years ago. The lawyer told her that people believe the inheritance tax just goes after the rich, but in reality, lawyers like him make sure those who are wealthy shelter their income so when they die they never pay a tax.
“And the people who are paying it are the people you think you are protecting,” she recollected.
Jochum did note that in her opinion the timing of the bill is off with the Revenue Estimating Committee meeting later this week.
Democrat State Sen. Janet Petersen voted for the bill as well. She argued that it benefits the LGBTQ community.
Dawson closed his remarks by saying that it is important the legislature finds a way to provide relief for Iowans who worked through the pandemic and making permanent tax cuts is much better than one-time stimulus checks.
“What we have here today is building Iowa back better a great code for the future,” he said.
Senate Majority Leader Jack Whitver echoed Dawson’s sentiments.
“SF 576 provides Iowans with permanent and certain tax relief and keeps our promise to Iowans to reduce their tax burden,” Whitver said. “One stimulus check wears off in a matter of days or weeks. Permanent tax relief gives small businesses and Iowa families confidence to work and invest in this state. It is a long-term pro-growth strategy to expand career opportunities and help Iowans keep more of their hard-earned money. After today’s vote, I look forward to cutting Iowa income taxes even more in the future.”