A tax break for businesses cleared the Iowa Senate and House in the final hours of the 2025 Iowa Legislature.
The bill reduces the business tax rate for the state fund for unemployment benefits. According to Representative David Young, a Republican from Van Meter, the current tax rate was set in 1987. “With an Unemployment Trust Fund at almost $2 billion, the sound argument is being made that we’ve been over collecting, especially compared to other states,” Young said. “The proposal before us saves employers and businesses approximately $975 million over 5 years, injecting that back into the private sector.”
The bill has been one of Governor Kim Reynolds’ priorities since last year. It passed the House and Senate Wednesday with GOP support. Democrats opposed it. Representative J.D. Scholten, a Democrat from Sioux City, said the legislature isn’t looking out for working class Iowans.
“We’re living in the second gilded age with massive income inequality, record economic concentration and expansive corporate greed,” Scholten said. “It’s bills like this that put a thumb on the scale towards billionaires and towards massive multinational corporations.”
Other Democrats said the Unemployment Trust Fund balance is so high because it’s paying out far less after Republican lawmakers cut unemployment benefits from 26 to 16 weeks. Senator Janet Petersen, a Democrat from Des Moines, said the legislature should focus on helping laid off workers.
“You want to pull money out of Iowa’s unemployment insurance system to give another corporate tax break to companies that are laying them off,” Petersen said.
Other Democrats said the system could fail if there’s a recession. Senator Adrian Dickey, a Republican from Packwood, said state law ensures the fund is stable because higher tax rates can be triggered. “If…the fund starts dipping to the point where it looks like it’s in danger, that the claims going out are more than the monies go in,” Dickey said, “…there’s mechanisms put in there to protect that.”
In a written statement, Governor Reynolds said Iowa’s unemployment insurance tax has “needlessly punished” Iowa businesses and the bill will “end the over collecting.”