Republican legislators have passed a bill designed to provide the largest tax cuts in Iowa history.
“This bill is really significant to Iowa,” said Senator Randy Feenstra, a Republican from Hull who is chairman of the Senate Ways and Means tax-writing Committee. “…It allows the Iowa worker to simply keep more of their paycheck.”
Twenty-eight Senate Republicans approved their tax plan shortly after two o’clock this Saturday afternoon. The bill would cut individual income taxes by an average of 10 percent in 2019. In future years, corporate tax cuts are to be added to the mix — for a total reduction in state tax revenue expected to be in the range of $400 million. Senator Jim Carlin, a Republican from Sioux City, said if Iowa businesses are to grow, Iowa taxes have to shrink.
“Lower tax rates…incentivize making money, creating jobs and investing,” Carlin said.
Democrats say Iowa millionaires will pay about $18,000 less, on average, while Iowans who earn between $30,000 and $40,000 a year will get an average tax cut of $92 a year.
“This bill is cutting income taxes for millionaires at the expense of ordinary Iowans,” said Senator Rob Hogg, a Democrat from Cedar Rapids.
Senator Matt McCoy, a Democrat from Des Moines, said there’s a “secret tax increase” tucked in the bill, as it calls for collecting sales taxes on digital goods and services, things like Netflix, Spotify, Uber and Lyft.
“It’s a shell game,” McCoy said. “You’re trying to fool the taxpayers.”
Representative Peter Cownie, a Republican from West Des Moines, said it’s time to “modernize” the state sales tax for the future.
“This is a question of fairness for our Main Street businesses in all of our communities and districts,” Cownie said.
Representative Mary Wolfe, a Democrat from Clinton, said the commercial property tax cut legislators approved in 2013 “didn’t live up to the hype” and this income tax cut won’t either.
“All I can say is: ‘God bless the State of Iowa,'” Wolfe said. “It’s going to need all the help it can get.”
Other Democrats like Representative Chris Hall of Sioux City warned the tax cuts are so large, there will be a “flood of red ink” in the state budget in future years.
“It goes against good judgment,” Hall said. “It goes against good math.”
Republicans like Cownie emphasized that the plan is written so tax cuts in 2020 and beyond will not go into effect unless state tax collections are growing at least four percent annually.
“A significant trigger or guard rail to protect our budget in the future, while also providing meaningful tax relief,” Cownie said.
Republicans and Democrats agreed the federal tax cuts enacted in December were a motivating factor for cutting taxes at the state level. That’s because the state will get a windfall of millions because of the way Iowa income taxes are calculated
The bill passed the House shortly after five p.m. with the support of 54 Republicans. All the Democrats present in both the House and Senate voted against the bill, as did the independent state senator who left the GOP in the summer of 2016.