Don't reverse the positive impact of federal tax reform at the state level
This column is written by Lynn Schreder, an NFIB member, and owner of KHI Solutions, a small business, headquartered in Fort Dodge
I am a small-business owner who is excited about the new federal Tax Cuts and Jobs Act because lower taxes are allowing me to grow my Fort Dodge insurance business for the first time in many years. Unfortunately, the Iowa Legislature is talking about state tax changes that could put a damper on that enthusiasm.
Instead, I wish state lawmakers would consider eliminating the federal tax deduction, significantly reducing state income tax rates, and adopting the new small-business federal tax deduction, section 199A here in Iowa.
Over the past year, Congress and the administration in Washington, D.C. have shown a deep commitment to growing the economy by reducing costly, outdated, and unnecessary rules and regulations. They have also enacted historic tax reform legislation that’s meant to help small-business owners like me expand, add jobs, and help strengthen the economy.
I am just one small-business owner of many using the money they’re saving as a result of the new federal law to give pay raises and bonuses to employees or replace worn-out equipment.
Our business, KHI Solutions, has given our employees a pay raise and planned to use our tax savings to hire another worker, but that was before we realized any savings we might see because of the federal tax cuts could be wiped out if nothing is done at the Iowa Capitol.
The problem is that Iowa allows a 100-percent deduction for federal income taxes paid. Ordinarily, that’s good, because it helps reduce the amount we pay in state taxes, but, in this situation, I am paying less money to the federal government, so I can’t deduct as much from my state income taxes. Ironically, that means I’ll owe the state more.
By lowering state tax rates across-the-board and adding pro-growth components to our tax code like section 199A, Iowa will also become more competitive with our neighboring states and the rest of the nation. It will allow Iowa’s hardworking families and businesses to keep more of their hard-earned money, so they can decide how to save, spend, and invest.
Small business is the foundation of Iowa’s economy. Small businesses account for over 200,000 employers in the state and employ over 650,000 Iowans, according to the latest figures from the U.S. Small Business Administration.
The time for Iowa lawmakers to act on tax reform is now, and I hope the House and Senate can come together to pass meaningful reforms that will help small-business owners, their employees, and their families.
