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Gradual phaseout of state income tax advances
State lawmakers debate what kind of impact the proposal would have on government services, including education
Gazette-Lee Des Moines Bureau
Mar. 15, 2023 6:18 pm
DES MOINES — Against the backdrop of accusations that his proposal to phase out the state tax on income would bankrupt the state, Sen. Dan Dawson insisted Wednesday that if his bill is passed into law, future cuts to state spending would not be necessary.
Republican state lawmakers Wednesday advanced out of the Senate’s tax policy committee Dawson’s proposal to accelerate current state income tax reductions and eventually phase out the tax entirely.
Under a state law passed just last year, the state’s income tax rates are being gradually reduced until most Iowa workers will pay at a rate of 3.9 percent.
Dawson’s bill would make those gradual reductions happen faster, and would reduce the rate to 2.55 percent by 2028. His bill also would create a mechanism to eventually phase out the state income tax altogether.
Currently, the income tax produces nearly half the revenue to the state’s general fund, the largest source that funds state government and all the services it provides. Opponents to Dawson’s bill express concern that it would reduce future state revenue so that eventually the state would be forced to cut services or dramatically reduce spending on things like public education.
Dawson on Wednesday insisted that would not happen. The Republican from Council Bluffs who chairs the Senate’s tax policy committee said future revenue growth plus surplus money in the state general fund and billions more in a taxpayer relief fund would enable the state to avoid spending reductions even once his proposed tax cuts are fully employed.
Dawson described the bill as a responsible, long-term phaseout of the state income tax.
“There doesn’t need to be cuts if you manage your budget and you manage your tax policy in a responsible way,” Dawson said.
Sen. Pam Jochum of Dubuque, the top Democrat on the committee, was skeptical.
“Yes, we do need to look long-term at our revenue side and at our spending side. I get that. I was a single mom — I had to make a dollar stretch,” Jochum said. “I also know that we also need to be very responsive to the needs of the people of Iowa.”
With its passage out of the Senate Ways and Means Committee, Senate Study Bill 1126 now is eligible for debate by the full Iowa Senate.
Restrictions on government investing approved
The House passed a measure restricting public investments in companies that focus on environmental, social and governance-investment strategies.
Senate File 507 passed on a party-line vote, with Democrats opposed, and is headed to Gov. Kim Reynolds for her signature. The bill previously passed the Senate.
The bill prohibits public entities and state retirement plan managers from investing public funds with companies that have environmentally and socially conscious corporate standards and policies, or from contracting with a list of scrutinized companies identified as using so-called ESG strategies. It also prohibits public entities in the state from boycotting certain companies to inflict economic harm that do business with the fossil fuel, timber, firearms, ammunition or production agriculture industries.
Critics of the investment strategy, mainly conservatives, view it as part of a broader agenda by Democrats to spread “woke capitalism,” and that such measures are needed to prevent an overreach that would impose a policy agenda on Americans’ retirement accounts.
Supporters of ESG say that following these principles allows people to make money, have a positive impact on the world and avoid some financial risks caused by climate change.
“We’re saying we want the best return on our investment. We don’t care about the ESG stuff,” said Rep. Shannon Lundgren, R-Peosta, the bill’s floor manager. “Go out and find our best return on our investment in Iowa.”
$1 million ticket
A Mega Millions ticket purchased in Des Moines is a $1 million winner, according to the Iowa Lottery.
Purchased at a QuikTrip in Des Moines, the ticket was one of three nationwide to win $1 million in Tuesday’s drawing, the lottery said, joining winning tickets in California and North Carolina.
The winning ticket from Des Moines, which remains unclaimed, matched the first five numbers but missed the Mega Ball.
QuikTrip will receive a $1,000 bonus from the Iowa Lottery for selling the ticket.
Million-dollar prizes must be claimed at Iowa Lottery headquarters in Clive, the lottery said.