The discussion on tax reform continues at the Capitol. When we passed historic income tax relief in 2018, that was only a first step. Time after time, Iowans have shown us they want bold reforms. We again intend to deliver on that promise and have proposed a bold plan to help hard-working Iowans, make Iowa more competitive with surrounding states, and simplify a complicated tax code.
Over the next several years, Senate File 2206 reduces the personal income tax rate to 3.6 percent for all taxpayers, implementing a flat tax for Iowans. This change alone will bring us from one of the states with the highest income tax rates to being the fourth lowest tax rate in the country. The bill also completely restructures the Taxpayer Relief Fund and turns it into the Income Tax Elimination Fund and directing the fund be used in the future to continue cutting income taxes and work towards completely eliminating the income tax in Iowa.
Senate File 2206 also starts to untangle the complicated tax code decades in the making. The reason tax credits are created in the first place are because of high tax rates. They are created as a band-aid for uncompetitive tax rates to try to attract people and employers to the state. The real solution is much simpler than a complicated system of credits and exemptions. It’s lowering the rate. Our tax proposal drives down the corporate tax rate and eliminates $141 million in tax exemptions and credits.
Finally, the bill simplifies a complicated sales tax system and streamlines over one thousand jurisdictions into a unified sales tax rate. This means the Local Option Sales Tax will be incorporated into a unified sales tax rate and still ensures the one cent will be remitted back to cities and counties. Because of this change, the Natural Resources and Outdoor Recreation trust would be funded. This proposal is a responsible approach to funding a priority of many Iowans.
We again intend to deliver historic income tax relief for Iowans. I believe our proposal will deliver on the promise to ensure Iowans keep more of what they earned and again take another step towards being the best state in the country to live, work and raise a family.