A key state senator says the debate over the future of Iowa’s Area Education Agencies, teacher pay and general state funding for schools has delayed decisions on tax policy.
“To the big income tax question, we really need to get a budget and figure out what our spending requirements are and what we can return back to taxpayers,” said Senator Dan Dawson, a Republican from Council Bluffs who is chair of the Senate Ways and Means Committee.
Dawson said the longer it takes to resolve differences among Republicans in the House and Senate on state spending issues, it’s more likely the 2024 legislative session will end without passage of another cut in the state income tax. “Iowans are still going to get an income tax cut next January and they’re getting one the year after that,” Dawson said. “When we passed the largest tax cut in Iowa history in 2022, that was a four year plan, so even walking out and not having some of these issues resolved, Iowans are still getting tax cuts the next two years.”
In January, Governor Reynolds said with billions in Iowa’s Taxpayer Relief Fund, the individual income tax should be reduced more. Dawson has proposed a different idea — investing that money and using any profits to gradually reduce Iowa’s income tax, until it’s eliminated several years from now. “I think there’s two perspectives on how to use those monies in the Taxpayer Relief Fund,” Dawson said. “You could send a one-time check out to Iowans, right? And that’s essentially what the governor’s proposal would do is just try to get that money out as soon as possible to Iowans, but it gets back to ‘What’s your long term vision?'”
Dawson said his plan would avoid the “misstep” of cutting taxes too much, too quickly and sending the state’s budget into a tailspin.
Representative Dave Jacoby of Coralville is the top-ranking Democrat on the House Ways and Means Committee. He suggested the governor’s retroactive tax cut to the beginning of this year is a gimmick. “To be blunt about it, sending a check back in a short term thing in an election year seems a little convenient to me,” Jacoby said.
Jacoby said lawmakers from both parties need to know the full impact of previously approved tax cuts before approving more. “We have not sat down to review everything we’ve done since the 2013 property tax cut bill, the 2017 and 2018 tax cut bills,” Jacoby said, “and also what we’re doing now on income tax.”
Jacoby said tax cuts should targeted to working Iowans and the current law that shrinks Iowa’s income tax to a single flat tax delivers a bigger tax break to the wealthies Iowans. Jacoby and Dawson made their comments on this weekend’s “Iowa Press” on Iowa PBS.