The Op-Ed supports the Governor's plan to eliminate Iowa's income tax.
Iowa State Director Matt Everson, along with John Hendrickson, pollicy director for Iowans for Tax Relief, penned an Opinion Piece that ran in the Des Moines Register supporting the Govenor’s plan to eliminate Iowa’s income tax.
Read by clicking the limk above or the full article below.
Once again, one of Gov. Kim Reynolds top priorities for the 2024 legislative session is income tax reform. A champion of fiscal responsibility, the governor knows restraining spending and returning tax dollars to the hard-working Iowans who paid them is the best path to economic growth. Once one the of the highest-income-tax states in the nation, Iowa in 2022 passed the most comprehensive tax reform in the United States.
By 2026, the nine-bracket income tax system will be replaced by a flat 3.9% for every Iowa taxpayer. That is almost a 60% reduction in the top tax rate. Reynolds, however, believes that this year there’s room to go even lower.
A major reason for pursuing further income tax reform is the state’s large budget surplus. Iowa ended fiscal year 2023 with a $1.83 billion surplus, which was $86.3 million higher than originally estimated. The fiscal year 2024 surplus is projected to be $2.12 billion, rising to $2.99 billion in the fiscal year 2025.
Iowa’s reserve accounts are filled at their statutory maximums and projected to continue at this level in future fiscal years. The surpluses have also fueled an enormous growth in the Taxpayer Relief Fund (TRF). The TRF has a current balance of $2.73 billion, and this is projected to increase to $3.66 billion in fiscal year 2024 and $3.855 billion in fiscal year 2025.
With the large surpluses and the massive amount in the TRF, Reynolds has stated that the government is still collecting too much from taxpayers. Therefore, her intention is to return those dollars to taxpayers. During the last legislative session, Sen. Dan Dawson, who chairs the Ways & Means Committee, introduced a measure that establishes a good framework to move forward.
Dawson’s goal is to accelerate, lower, and then eliminate Iowa’s income tax. His proposal accelerates the 2022 tax rate reductions to a flat 2.% in 2028, then uses the Taxpayer Relief Fund to lower the income tax rate further and slowly ratchet the rate down until it is eventually eliminated.
At the very least, Dawson and Reynolds have suggested that Iowa’s income tax should be a flat 2.5%, tying Iowa with Arizona for the lowest flat income tax in the nation.
Critics argue that further income tax reform will lead to an apocalypse, benefitting only wealthy Iowans, destroying the state’s budget and leading to cuts in services.
However, they are misreading the evidence, which doesn’t support their dire predictions. Iowa revenues continue to be strong even with income tax rate reductions. Reynolds and the Legislature have made sure government priorities are funded. Slowing the growth of spending isn’t a “cut,” it’s called responsible budgeting and spending within our means.
Senate Majority Leader Jack Whitver nailed it on the head when he told the Economist, “Every single time since we’ve cut taxes, revenues have still come in higher than estimates.” Iowa is a shining example of how to implement a successful and prudent fiscal conservative policy agenda.
Further income tax reform will benefit Iowa families, small-business owners and their employees. Remember, many small-business owners pay their income taxes through the individual income tax code. Small businesses are the backbone of Iowa’s economy, especially in rural Iowa.
Reynolds’ goal of further tax reform is not only financially sound but fiscally responsible, promoting economic growth by allowing taxpayers to spend and invest their tax dollars as they see fit, rather than growing government.
