Kearns says tax bill is tailored for Iowa’s wealthiest

BY CHUCK VANDENBERG
PCC EDITOR

DES MOINES – Retiring State Rep. Jerry Kearns (D-Keokuk) said the agreement reached on the state’s largest ever income tax relief bill leans too heavily in favor of the state’s richest people.

Gov. Kim Reynolds and Iowa House and Senate leadership announced an agreement on the largest tax relief and reform package in state history Friday afternoon.

The bill, which could be up for debate as soon as Tuesday according to some reports, would cut Iowa income tax bills by close to $400 million next year alone. The total reduction over five years could total in excess of $1.5 billion through 2023.

“This bill is heavily favored toward the richest of Iowans and doesn’t do enough for the middle and lower income residents of the state,” Kearns said on Saturday.

“The percentages look good on paper, but I think, from what I’ve heard, about 80% of the total dollar savings of this tax relief bill go to to wealthiest of Iowans.”

KEARNS

Kearns said there is some transferring to sales tax to help compensate for the lost revenue, but he said taxing online sales, which is a part of the bill, will be tough to do as an individual state because of where sales originate. He said he thinks that will probably need to be a federal effort.

“That’s going to be hard to do without other states involved and it may have to be a federal program,” Kearns said. “I don’t think it can be done at the state level.”

According to Reynold’s office, Iowa has the fourth highest individual income tax rate and the highest corporate tax rate in the country. Iowa is ranked 40th in business tax climate by the nonpartisan Tax Foundation. U.S. News and World Report, while ranking Iowa first overall, ranked Iowa’s business environment 46th.  If nothing is done to reform the tax code, Iowans’ state taxes will increase as a result of federal tax reform because of federal deductibility.

This historic tax reform package:

  • Prioritizes Iowa’s hardworking, middle class families
  • Reduces rates and eliminates federal deductibility, making Iowa’s tax code more competitive and transparent
  • Dramatically simplifies Iowa’s overly complicated tax code
  • Ensures fairness for Main Street businesses in the modern economy
  • Protects budget sustainability in future years

Hardworking Iowa families and small business owners will receive $398 million in income tax relief in 2019. The tax plan immediately provides an average tax reduction of nearly 10 percent and continues to provide tax relief beyond 2019. When fully implemented as soon as 2023, the plan will reduce the number of individual income brackets to four, with a top rate of 6.5 percent. The top corporate rate will be lowered to 9.8 percent.

At full implementation in 2023;

  • A single taxpayer with no children making $25,000 will see a 22.3% tax reduction
  • A single taxpayer with one child making $48,000 will see a 25.8% tax reduction
  • A couple with two children making $75,000 will see a 25.7% tax reduction

This agreement simplifies Iowa tax law by eventually eliminating federal deductibility, reducing the number of individual income tax brackets, automatically coupling with most federal tax laws and providing a comprehensive review of tax credits.

The tax plan utilizes a trigger to protect budget sustainability in future years, ensures full repayment of the Cash Reserve Fund this year and does not reduce the property tax backfill. It maintains large ending balances in both Fiscal Year 2019 and Fiscal Year 2020, according to estimates from the REC, and protects key budget commitments made to education, health care, and public safety. It also modernizes the sales tax code to treat online businesses the same as Main Street businesses.

The agreement also provides relief to farmers and small business owners by increasing the Section 179 and Qualified Business Income (QBI) deductions:

“The 2018 legislative session was one of accomplishments aimed at unleashing opportunities for all Iowans,” Gov. Kim Reynolds said. “This historic state-level tax reform – coupled with tax reform at the federal level – will bring significant relief to working-class Iowans in a fiscally responsible fashion that will allow the state to meet its budget responsibilities in the future. These tax cuts are meaningful to Iowans making tough decisions about what they can and cannot afford. I commend the Iowa House and Senate for sharing in my priority of putting Iowans first.”

About Chuck Vandenberg 5098 Articles
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