Iowa GOP lawmakers advance bill requiring supermajority for tax increases

DES MOINES — Raising state income taxes in Iowa would become much more difficult under legislation advanced by Republican lawmakers.

Iowa Senate and House subcommittees on Tuesday advanced companion bills calling for a constitutional amendment that would require a two-thirds vote of the Iowa Legislature to increase individual or corporate income taxes, and to require that any individual income tax rate increase be set at a single rate for all individuals regardless of income.

Senate Study Bill 3142 and its companion, House Study Bill 721, would enshrine a “flat” individual state income tax rate into the state’s constitution by barring future legislatures from reverting back to a progressive income tax with multiple brackets.

“What this does is decouple future tax increases from partisan votes,” said Rep. Bobby Kaufmann, R-Wilton, chair of the House tax policy Ways and Means Committee.

The constitutional amendment would need to pass two consecutive two-year general assemblies of the Iowa Legislature before being put to Iowa voters for approval on the next statewide general election ballot. The earliest it could be on the ballot would be November 2026, and would need a simple majority to be enacted.

Supporters, including tax policy groups, Iowa Association of Business and Industry and Iowa Bankers Association, said the bill would provide predictability and stability in the tax code, making Iowa more attractive for investment and growth.

Tyler Raygor with Americans for Prosperity called the bill’s supermajority requirement “a prudent safeguard against hasty and over taxation.”

“We think that it really strikes a perfect balance between protecting the needs of state government, but also protecting our taxpayers,” Raygor said.

Critics argued the bill will make it harder in the future should the need arise to raise taxes to weather financial storms or economic crisis and ensure that state is generating sufficient revenue to provide for essential services like education and health care.

Mike Owen, deputy director of progressive advocacy group Common Good Iowa, said the bill betrays democratic principles by making one “no” vote worth two “yes” votes.

Opponent: Tax cuts will reduce services that affect quality of life

Raising taxes in Iowa is difficult even as it is with a simple majority, Owen told lawmakers. The House and Senate legislation enables a one-third minority in either chamber block any increase in income or corporate income tax rates. That would take only 17 members of the Senate or 34 members of the House to stop majorities from passing a future rate increase.

The restriction does not apply to increases in the sales tax or other fees and fines that tend to be borne more heavily, as a share of income, by lower- and middle-income Iowans.

Owen and representatives for Interfaith Alliance of Iowa and Iowa’s Catholic bishops said the legislation cements inequities into Iowa taxes by allowing only a flat-rate income tax that disproportionately benefits wealthier Iowans.

Common Good Iowa, based on analysis using Iowa Department of Revenue data, estimates under state income tax cuts passed in 2022 the average millionaire will see a cut of $62,000 a year when fully implemented in 2026. In the middle, Iowans earning $40,000 to $60,000 will see an average cut of $300. Most with incomes under $40,000 will see no cut at all.

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The nonpartisan Legislative Services Agency estimates the tax cuts will cost $1.9 billion a year by fiscal year 2028.

The eventual consequences will be cuts to services that make Iowa a good place to live, work and raise a family, including funding for schools, health care, public safety, child care and environmental protection, according to Common Good Iowa.

“This is an incredible burden, especially if you have a situation where, as we believe 10 years from now, we’re going to get a fiscal crisis,” Owen told lawmakers. “And we’re going to be cutting services heavily or — that’s what we’re going to have to do, because of the tax cuts passed. People might not like that. And the persons sitting in your seats will be then in a position where they can’t correct it.”

Catholics: ‘Paying taxes is one way people give back to society’

Tom Chapman, director of the Iowa Catholic Conference, said the group is registered opposed to the bill based on Catholic social teaching.

“Which says that all members of a society have responsibility to contribute to the common good, from those to whom much has been given, much should be expected,” Chapman said. “Paying taxes is one way people give back to society.”

He said the Iowa Catholic Conference in particular opposes the bill “because it would not permit the legislature to adopt the lower tax rate for low-income Iowans.”

“The principles of distributed justice suggests we should have a special concern for the poor and vulnerable,” Chapman told lawmakers.

Polling shows most Iowans support supermajority to raise taxes

Sen. Jason Schultz, R-Schleswig, said measure would help prevent taxpayers from having their income “taken away from them easily, willy nilly,” through tax increases.

Jake Highfill with Iowans for Tax Relief cited polling from the tax policy group that found 68 percent of respondents, including Democrats, Republicans and independents, would support an amendment requiring a supermajority of the Iowa Legislature to raise taxes. Whereas 48 percent would support a constitutional amendment to implement a uniform income tax rate for all individuals.

“I think that it is prudent to have the guardrails (on any future tax increases) for the fact that with all the hard work that we've done, we don't want that hard work to just be gone over a period of a few years,” said Rep. John Wills, R-Spirit Lake. “ … We understand that our economy will sometime in the future go down. We have budgeted prudently and accordingly for that. So I'm very excited about this.”

Republicans note, despite the tax cuts already delivered, Iowa ended 2023 with a $1.83 billion surplus, $902 million in reserve funds and has $3.5 billion in the Taxpayer Relief Fund.

The bills now head to the Ways and Means Committee in the House and Senate for consideration.

Republican lawmakers are also pursuing separate measures that would cut Iowa’s income tax rates faster than currently planned and put Iowa on a path to eliminate the individual income tax entirely.

Comments: (319) 398-8499; tom.barton@thegazette.com