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Cedar Rapids, Iowa 52401
DES MOINES - The head of Iowa's revenue department says she's stoked over state income tax cuts that will begin lowering Iowans' payroll withholdings effective Jan. 1.
'It is an exciting time to be in taxes. If you're a tax nerd, this is good stuff,” Courtney Kay-Decker, director of the Iowa Department of Revenue, told Gov. Kim Reynolds on Monday at the start of her yearly hearing on her state budget request.
The source of her excitement was twofold:
Federal income tax cuts started last February and now the largest income tax cut in Iowa history begins its multiyear implementation in January. And second, a U.S. Supreme Court ruling last June put states in a stronger position to force online retailers to collect sales taxes, which also expand Jan. 1 under Iowa's new tax law.
'This is a once-in-a-lifetime sort of thing that we all get to do,” she told the governor. 'It's so fun. This is stuff that we don't see very often. You see bits and pieces of it come along, you don't see major reform like that very often in the tax world.”
Since Iowa has a federal deductibility law, Republicans who passed the plan - which Reynolds signed into law last May - say the change is designed to prevent Iowans from seeing an increase in their state tax liabilities. The federal cut reduced Iowans' federal tax liabilities by an estimated $1.8 billion.
Those cuts already have boosted state revenue by about $100 million this fiscal year because Iowans have fewer federal taxes being deducted.
Kay-Decker indicated she and her staff spent months working on Iowa tax-code changes by updating 138 forms and creating seven 'brand-new” ones, along with addressing 29 regulations and placing an updated withholding calculator for 2019 year for Iowans to use on her agency's website at tax.iowa.gov/withholding-calculator.
The department also is continuing cybersecurity efforts to combat tax refund fraud, she said.
The new law, Senate File 2417, also included sales tax 'modernization” changes that attempt to capture more state revenue from online purchases made by Iowans. State sales taxes will be collected and remitted on digital books, ring tones, electronic games and entertainment, ride-hailing services, online travel sites and subscription services such as streaming audio or video, among other items.
According to the revenue agency analysis, for tax year 2019 Iowa's 1,639,741 income tax filers would receive an average cut of $243, or 9.8 percent.
By calendar tax year, the reductions would be $255.3 million in 2019; $307.6 million in 2020; $391.6 million in 2021; $405.9 million in 2022; $525.9 million in 2023; and $851.9 million in 2024.
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