Kim Reynolds on Tax Reform

	Kim Reynolds on Tax Reform

Cut income tax rate this year to flat 3.65%; next year 3.5%

Even with the tax cuts we have already delivered, state revenue continues to grow, ending the year with a $1.83 billion surplus and more than $900 million in reserve funds. Let me be absolutely clear: the surplus does not mean that we aren't spending enough; it means we're still taking too much of Iowans' hard-earned money. Tonight, I'm proposing a bill that reduces the income-tax rate to a flat 3.65%, The following year, in 2025, the rate would fall again to flat 3.5%. Source: 2024 State of the State Address to Iowa legislature , Jan 9, 2024

On a path to the 4th lowest income-tax rate in the country

In 2018, we began the overhaul of Iowa's tax code. What happened next? State revenue soared, exceeding expectations. And three years later, the legislature voted to remove the revenue triggers, guaranteeing future tax cuts. Because we ignored the hysteria, Iowans get to keep more of their money. And because we pushed forward, we're now on a path to the fourth lowest income-tax rate in the country, a flat 3.9%, and Iowans no longer pay tax on their retirement income. Source: 2023 State of the State Address to the Iowa legislature , Jan 10, 2023

Set tax rate at 3.9%, less than half from four years ago

While Democrats in D.C. are spending trillions, sending inflation soaring, Republican leaders around the country are balancing budgets and cutting taxes. Today, I signed legislation that eliminates Iowa's tax on retirement income and sets our tax rate at 3.9%. That's less than half of what it was just four years ago. And it shouldn't come as a surprise that out of the top 20 states with the lowest unemployment rates, 17 have Republican governors. Source: GOP Response to the 2022 State of the Union address , Mar 1, 2022

Replace multiple tax brackets with 4% flat tax

Last year, the state ended with a $1.2 billion surplus, on top of nearly $1 billion cash reserves. That's good. We kept spending down. But it also means that, despite the historic 2018 tax cuts, we're still taking too much from Iowans' paychecks. That needs to stop. Now. Tonight, I'll introduce a comprehensive bill that significantly cuts taxes for all Iowans. It eliminates our complex system of multiple tax brackets and sets one tax rate of 4%. Flat and fair.

Also, starting next year, this bill will do even more by eliminating the taxation of retirement income. For the vast majority of retired Iowans--those who rely on their 401K, IRA, or pension--that's not just an income-tax cut; it's a full income-tax repeal. And that's how it should be. You've worked hard all your life, saving for retirement and paying your fair share in taxes. It's time you get a break from the tax collector; you've earned it, now you should enjoy it.

Source: 2022 State of the State Address to the Iowa legislature , Jan 11, 2022

We need to continue the conversation about cutting taxes

Unlike many states we're starting from a good financial position. We aren't looking at tough budget cuts and we're certainly not looking at raising taxes. If anything, we need to continue the conversation about cutting taxes, and we can start by getting rid of the unnecessary triggers that were put in place in 2018. Let's make Iowa more competitive and guarantee our taxpayers that they can keep more of their hard earned money. Source: 2021 State of the State Address to the Iowa legislature , Jan 12, 2021

Reduce top state income tax rate to 5.5% by 2023

I have no interest in raising taxes, so any increase in revenue from a sales tax must be more than offset by additional tax cuts. I'm proposing to cut income taxes by an additional 10% for almost every Iowan, with lower-income Iowans receiving as much as a 25% cut next year. Just one year ago, our top tax bracket was at almost 9%, one of the worst in the country. Our top rate will be down to 5.5% by 2023--significant progress that will make Iowa competitive with our peers. Source: 2020 Iowa State of the State address , Jan 14, 2020

Update Iowa tax code to take advantage of federal tax cuts

Last month, Congress passed historic tax reform. For that, I want to thank Congress and the President.

But here's the thing: Because of an outdated provision in Iowa's tax code, Iowans will see a tax increase if we don't pass tax reform at the state level. Iowa is 1 of only 3 states that allow taxpayers to deduct their federal taxes. While that might sound like a good thing, right now it's not. It creates complexity, and worse--it means that when your federal taxes go down, your Iowa taxes go up.

With federal deductibility in place, when the federal government cuts taxes for working-class families, Iowa raises taxes on those same families. That's not just a hypothetical. It's what will happen if we don't act.

Therefore, I will be proposing a tax reform package that significantly reduces rates, modernizes our tax code, and eliminates federal deductibility. This is an opportunity to free us from decisions made in Washington, D.C. and simplify our tax code.

Source: 2018 State of the State speech to Iowa legislature , Jan 9, 2018

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