The GOP-passed tax-cut agreement signed into law Wednesday will be phased in, provided that economic triggers are met before key steps take effect.
Some of the law’s provisions include:
• Triggers are based on reaching or exceeding an annual net general fund growth of tax receipts of 4 percent.
• The law provides tax relief to farmers and small-business owners as well as individuals.
• Federal deductibility — that is, deducting federal tax liability from state returns — for corporate income taxes is slated to be eliminated by tax year 2021, with some exceptions. The phaseout for individual income taxes will be complete by 2023.
• The nine income brackets used for Iowa income taxes now range from 0.36 percent for annual taxable income of $1,628 or less to the top rate of 8.98 percent for taxable incomes over $73,260. It will be revamped to 0.33 percent at the low end, up to a top rate of 8.53 percent in tax years 2019 and 2020, according to a state analysis.
• When fully implemented, as soon as 2023, the plan will reduce the number of individual income brackets from the nine to four.
• The four new brackets will begin with a low rate of 4.4 percent for incomes of 6,000 or less and have a top rate of 6.5 percent for Iowans making $75,000 or more.
• The top corporate rate will be lowered to 9.8 percent from the current 12 percent.