Reynolds backs $ 2 billion tax cut with income tax rate changes

DES MOINES, Iowa (AP) – Iowa Gov. Kim Reynolds on Tuesday night proposed that Iowa cut taxes by nearly $ 2 billion by switching to a 4% lump-sum income tax on four years and repealing all state taxes on retirement income starting next year.

The plan would allow retirees 55 and over to exempt income from individual retirement accounts, pensions and annuities and would include farmers who can exempt income earned from cash rent on farmland or capital gains on farmland. the sale of their farmland.

Reynolds made the proposal in the annual State of the State message to the Legislature, which convened its session on Monday.


The flat-rate tax proposal would reduce state revenue by about $ 1.58 billion by tax year 2026, when it would be fully implemented.

“The cuts will occur gradually over the next four years to protect priorities such as education and public safety. But in the first year alone, taxpayers will save almost $ 500 million. And by 2026, when the bill is fully implemented, the average family in Iowa will pay more than $ 1,300 less in taxes, on top of their $ 1,000 tax cut. compared to the 2018 bill, ”she said.

The retirement tax break would reduce state revenues by about $ 400 million in 2023, the first year it proposes to be effective.

Reynolds plans to leave $ 2 billion in the state’s taxpayer assistance fund if state revenue growth falls below a projection of 4% on average per year. Growth in government spending has typically been around 2% in recent years, and Reynolds’ budget team expects the difference between revenue growth and spending growth to be enough to pay for the changes. .

Reynolds also proposed other important policy changes, including:

– Reduces unemployment benefits from 26 weeks to 16 weeks and makes it more difficult for the unemployed to reject job offers. She is also proposing to create a division within Iowa Workforce Development that focuses on helping unemployed people find jobs.

– Launched a national law enforcement and corrections officer recruitment campaign that includes retention bonuses of $ 1,000 and offers a one-time retention bonus of $ 1,000 to teachers who promise to stay in the state for another year. with money from federal funds from the US bailout plan.

– Limitation of damages that can be claimed in lawsuits for trucking accidents and in lawsuits for medical malpractice.

– Institute state-wide building codes that would apply to commercial buildings, including child care centers.

– Require school districts to publish classroom materials online and provide a list of books available in school libraries with a process for anyone to challenge a book.

– Require students to take a citizenship test before graduating from high school.

– Require all gasoline retailers with compatible gasoline pumps and lines to offer E15 by 2026. All newly installed equipment must comply with E85 for gasoline or B20 for biofuel.

– Allow middle-income and low-income families and students with an individualized education plan to take 70% of the per-student funding allocated by the state – approximately $ 5,300 per student – to transfer their child to the education system of their choice.

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