Iowa House tax plan makes 3 proposals, and Democrats plan another

DES MOINES — Calling it simple, sustainable and largely in line with Gov. Kim Reynolds’ plan, Iowa House Republicans unveiled their plan Thursday for state income tax reductions, the third proposal now circulating in the Iowa Capitol.

The House Republican plan would gradually reduce the state tax on Iowa workers’ income until all workers’ income was taxed at 4 percent. That is what Republican governor also proposed earlier this month, as is the House proposal to eliminate the state tax on retirement income.

Where House Republicans go their own way is on business taxes. Their proposal does not include a reduction of Iowa’s corporate tax rate. Reynolds and Senate Republicans tied a corporate tax rate reduction to their plans.

The House Republican plan, according to a staff analysis, is estimated to provide $1.7 billion in tax relief — and thus a reduction in state revenue — once fully implemented. The plan includes transferring $829 million over six years from the state’s taxpayer trust fund to help offset that reduction in revenue.

The House plan’s price tag is close to the estimated $1.6 billion cost of Reynolds’ plan, but less than the estimated $2 billion cost of Senate Republicans’ proposal. Iowa’s current state budget is just more than $8 billion.

“I’ve been clear that we want to have something that’s simple as part of our tax plan, that’s sustainable as part of our tax plan, and something that works without having to raise any taxes,” Iowa House Speaker Pat Grassley, a Republican from New Hartford, told reporters Thursday. “I think that bill that we introduced (Thursday) achieves all of those goals.”

Jennifer Konfrst, leader of the minority House Democrats from Windsor Heights, said Democrats plan to introduce their own tax proposal, which they say will focus on reductions targeted to middle-class workers. Democrats have criticized Republicans’ flat tax ideas as disproportionately benefiting higher wage earners.

“Democrats believe we need a fair tax system that rewards work, provides real relief to middle class families, and puts more money in the pockets of working families,” Konfrst said in a statement. “The latest GOP tax scheme will leave too many Iowans behind. We don’t need more tax giveaways to the special interests, corporations, and millionaires.”

Zach Wahls, leader of the minority Senate Democrats from Coralville, said during a news conference Thursday that an analysis shows that the Senate Republican plan will raise taxes on some Iowans and will not help solve the state’s worker shortage.

“At the end of the day I think it just shows a clear contrast between Democrats and Republicans,” Wahls said. “The Republican plan will benefit corporations and the wealthiest Iowans. Democrats are focused on supporting hard work, rewarding work and not wealth, and putting more money in the pockets of hardworking Iowa families.”

Republicans, who have full control of the state lawmaking process with majorities in the House and Senate and a Republican governor, now have three different tax proposals on the table. Leaders will have to negotiate those proposals into one tax plan.

Republican leaders in both the Senate and House have said they expect to move quickly on the legislative process for their respective plans, likely starting each next week.

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