Gov. Reynolds proposed a bold tax reform proposal last week during her Condition of the State Address. Like many of us in the Legislature, the governor understands that our state’s tax code is outdated and anti-competitive. I appreciate her willingness to explore creative solutions to move our state forward. Additionally, I am happy the governor presented a proposal that cuts property and income taxes for Iowans, while still funding key priorities like mental health and water quality.
The governor’s bill is still being drafted, but she gave us a broad outline of her proposal. The key components include:
- Lower Income Taxes. Her plan reduces personal income taxes beyond what we passed in our 2018 income tax reduction bill. According to the Tax Foundation, Iowa is 42nd in the nation in personal income tax rates. In our region, only Minnesota has higher income tax rates. The governor’s proposal would improve Iowa’s personal income tax rank to 20th.
Our current income tax rates make Iowa uncompetitive. By lowering our rates, we would make Iowa a more attractive place to live, work, and raise a family. Lower tax rates would allow people to keep more of their own money. It would make it easier for Iowans to buy a home, pay off student loans, save for college, or simply make ends meet.
- Net Tax Reduction. While the governor’s proposal includes a one-cent sales tax increase, the plan is a net tax cut when you factor in the income tax and property tax reductions.
The first three-eighths of this additional sales tax revenue would be used to fund the Natural Resources and Outdoor Recreation Trust Fund, which voters approved several years ago.
- Reduces Property Taxes; Funds Mental Health. Iowa’s property tax payers currently fund our mental health system. This is a relic of an outdated mental health services delivery model. The governor’s plan shifts a significant portion of mental health funding to the state’s general fund. This is made possible through increased sales tax revenue. Her plan also caps the mental health property tax levy at a rate that locks in a property tax reduction.
The Iowa Senate will likely receive the governor’s tax proposal soon, and it will be up to the Legislature to sort through the details. As we consider the governor’s proposal, or any other tax-related ideas introduced this session, I will only support a plan on final passage that reduces taxes on hardworking Iowans.
I’m interested in knowing what you think of this proposal. Please share your thoughts with me on this or any other bill or issue you’re interested in. I look forward to hearing from you!