Iowa Senate forges ahead on tax cuts

DES MOINES - Senate Republicans indicated Wednesday they expect to forge ahead with broad-based tax reform yet this session despite a number of unresolved issues clouding the outlook of Iowa's economy.

'What we're trying to do is put Iowa on a shining pathway going forward and re-imagine what a competitive tax code looks like here in the state,” said Sen. Dan Dawson, R-Council Bluffs, before the Senate Ways and Means Committee advanced a major tax policy bill on a party-line vote.

Senate Study Bill 1250 proposes to accelerate the state's 2018 income tax cuts by eliminating the existing revenue 'triggers” that need to be met before lower tax rates kick in.

The bill also would phase out the state's inheritance tax over three years, ending it by Jan. 1, 2024.

The proposed legislation would strike requirements that state general fund revenue increase by 4 percent and equal or exceed $8.3 billion by fiscal 2024 for state income tax cuts enacted in 2018 to take effect.

Removing the revenue 'triggers” would enable Iowa to lower its top tax rate to 6.5 percent, compress income tax brackets from nine to four and eliminate federal deductibility as a way to provide significant tax reductions.

'This bill ultimately is going to put Iowa on a better pathway for a more fair tax code as well as a more competitive tax code,” Dawson said.

But he conceded the issue will be idled until the state Revenue Estimating Conference meets next week to revise the state's tax collection forecast, Congress and the president finalize details and rules for a federal stimulus package, and legislative Republicans set their joint fiscal 2022 state budget targets and hammer out a tax-policy compromise.

'I think you just made the case for not moving this bill today - it's a pretty persuasive case,” said Sen. Herman Quirmbach, D-Ames, before Republicans moved the bill to the debate calendar.

In addressing the 2018 'triggers” - provisions added at the insistence of Gov. Kim Reynolds and House Republicans - that Dawson called 'shortsighted” on Wednesday,

Sen. Pam Jochum, D-Dubuque, said the measures were enacted as 'guardrails” to keep the state budget from going off track should a halting economy not produce the growth needed to maintain funding priorities.

'These are not ‘want' programs, these are ‘need' programs,” said Jochum, the committee's ranking Democrat.

'Whether we act today or not, our economy has been artificially inflated with huge amounts of money - billions of dollars that flowed into this state from the federal government in 2020 and 2021,” she said.

'And we don't have our arms around the real impact of this pandemic on Iowa's economy, and I don't think we will for at least 18 more months when we will have to stand on our own two feet without an influx of billions of federal dollars,” she said.

Rather than cut revenue at a time of economic uncertainty, Jochum said, 'what we need to be focused on today and in this session is how to help the people who have been the most hurt by this pandemic.”

Dawson countered that Iowa has been cited by national rating services as having the nation's best fiscal policies, which include past action to cut tax burdens despite dire warnings from critics that did not come to fruition.

'These are not rushed ideas or necessarily new ideas,” Dawson said. 'These are policy goals for this caucus for years, and we will continue to advance these goals until we find ultimate success for Iowans.”

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