Statewide Iowa — Governor Kim Reynolds is proposing an end to state income taxes on pensions and retirement accounts and lowering the state income tax to a single rate of just four percent within four years.
The governor unveiled her plan Tuesday night during the annual “Condition of the State” address to legislators. When fully implemented in 2026, Reynolds says a four percent flat tax would save an average Iowa family about 13-hundred dollars a year.
Reynolds proposes that retired farmers no longer be taxed on cash rent for their farmland and she says Iowans who’ve earned stock in the company where they work should no longer be taxed when they sell shares.
Democrats like House Minority Leader Jennifer Konfrst say tax cuts should be targeted to the middle class.
Senate Democratic Leader Zach Wahls says some Iowans, like part-time workers, will wind up paying more in taxes under a four-percent flat tax.
Reynolds says bold action isn’t always government action and her tax plan lets Iowans decide where and how to spend more of their own money.
Reynolds is also asking legislators to reduce the number of weeks Iowans may receive unemployment benefits, from the current 26 weeks down to 16 weeks.
House Democratic Leader Jennifer Konfrst says it will take more affordable child care and housing and a welcoming state to solve the state’s workforce shortage,
Reynolds told lawmakers she will use federal pandemic relief money to provide one-time bonuses to law enforcement, correctional officers and teachers. Reynolds got her biggest burst of cheers, though, when she pledged the legislature would respond to parents raising complaints about books in schools that have sexual content.
Reynolds also unveiled a plan to let lower income parents get state money to cover private school tuition. Democrats like Senate Minority Leader Zach Wahls say public tax dollars shouldn’t be used for private schools and there’s already a process for reviewing objectionable school material.
Republican legislative leaders say the governor has made reasonable proposals that will bring meaningful change. Senate Majority Leader Jack Whitver of Ankeny says the Senate GOP might even propose a flat tax that’s lower than four percent.
Ten other states currently have a flat tax. Iowa’s income tax is the 16th highest in the country according to the governor’s staff and a four percent flat tax would move Iowa’s tax rate into the fifth lowest spot.
