Lt. Gov. Reynolds: Income tax reform will happen

But changes may be phased in over several years

Lt. Gov. Kim Reynolds talks with members of the Westside Conservative Club after addressing the Urbandale group Wednesday. (Rod Boshart / The Gazette)
Lt. Gov. Kim Reynolds talks with members of the Westside Conservative Club after addressing the Urbandale group Wednesday. (Rod Boshart / The Gazette)

URBANDALE — Lt. Gov. Kim Reynolds, Iowa’s governor-in-waiting, assured a conservative group Wednesday that income tax relief is on the way but might not arrive this year.

Pressed for details by the Westside Conservative Club, Reynolds said she and Gov. Terry Branstad have been looking at various computer “runs” designed to make the state’s complex individual and corporate income taxes “simpler and flatter,” but the state’s uncertain economic situation — especially the farm sector — has slowed the timetable.

“There are a lot of different scenarios that we’re looking at. How we get the biggest bang for the buck, but have it impact all Iowans in a positive way, and so we’re going to continue to run the numbers and you will see something with that. You will,” she told the breakfast gathering. “It continues to be a priority.”

Reynolds is slated to become Iowa’s governor once Branstad is confirmed as President Donald Trump’s choice to become U.S. ambassador to China.

She said that so far, Republicans working with state Department of Revenue tax specialists have been unable to “make the numbers work,” but the process is ongoing to assemble a comprehensive tax change package.

Creating a more competitive tax structure is critical to attracting and keeping Iowa businesses and workers needed to grow the state’s economy, Reynolds said, but the plan must be sustainable while maintaining commitments to education, Medicaid managed care and other priorities.

“Honestly, the budget has really made it tough,” said Reynolds, who conceded state agencies may be bracing for yet more reductions if revenue estimators downgrade current fiscal year projections when they meet next week.

“So maybe we put the legislation in place and we phase it in over a couple of years,” she told the Urbandale group. “If we don’t get it done this year, it’s going to continue to be a focus. We have to do it because that’s what is going to continue to make us competitive.”

Sen. Randy Feenstra, chairman of the Senate Ways and Means Committee, said he expects income tax legislation to surface later this month that proposes a comprehensive rewrite to be phased in over multiple years.

“Our system is the most complex in the nation and it takes time to unwind all of that. It will be changed over a three-, four-, five-year period,” he said.

The GOP plan would shrink the income tax brackets from nine to a number yet to be finalized, revamp tax credits and deductions and deliver relief in an overall amount yet to be determined.

Feenstra said to make sure there are reductions, all of the credits and deductions — and possibly the removal of some of those — must be accounted for to make sure that people don’t see an increase in their taxes.

“That’s the complexity of it and that’s why it takes time,” he said. “The key for us is tax reduction, simplification and tax equality across the board.”

l Comments: (515) 243-7220; rod.boshart@thegazette.com

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