Iowa Gov. Reynolds Proposes Four Percent Flat Tax

by Mary Stroka


Iowa Gov. Kim Reynolds on Tuesday proposed a tax cuts omnibus in her fourth Condition of the State speech.

“Under these high ceilings, next to this marble, among these columns and portraits, it’s tempting to believe that nothing good happens unless we legislate it, regulate it, or fund it. But in the small towns, around kitchen tables, in the fields and back-offices, Iowans understand that we in this building don’t fund anything. They do,” the Republican governor said. “And right now, they’re paying too much.”

The state’s possession of a $1.2 billion surplus and $1 billion cash reserves means the state is collecting too much money from taxpayers, she said.

Reynolds proposed eliminating tax brackets over the next four years to make way for a 4% flat tax rate for all taxpayers.

“In the first year alone, taxpayers will save almost $500 million,” she said. “And by 2026, when the bill is fully implemented, an average Iowa family will pay over $1,300 less in taxes. And that’s on top of their $1,000 tax cut from the 2018 bill. Now that’s money that can be reinvested in our economy and used to promote the prosperity of every Iowan.”

The bill would also end taxation of retirement income and cash-rent payments farmers receive when they retire from farming. She also proposed axing taxes on employees’ sale of shares of their company stock.

“This will be a game-changer that will incentivize employers to share ownership with their employees and send a message to the rest of the country: Come. Move to Iowa. Work here and become an owner in a company and grow your investment tax free,” she said.

Reynolds announced the creation of a re-employment division within the State to help Iowans get back to work. She said she would introduce a bill to reduce unemployment benefits to 16 weeks instead of six months and ensure unemployment insurance collectors cannot “turn down suitable jobs.”

“There are so many reasons for the worker shortage, but we need to recognize, in some cases, it’s because the government has taken away the need or desire to work,” she said. “The safety net has become a hammock. Now don’t mistake me – this isn’t the only cause, but it’s a growing problem, and it’s not just an economic one. There is dignity in work; it gives us meaning and purpose. So when it’s degraded, when idleness is rewarded with enhanced unemployment and stimulus checks, when work begins to seem optional rather than fundamental, then society begins to decay.”

Reynolds announced work-based learning initiatives, including the launch Wednesday of the first teacher registered apprenticeship program in the United States. Apprentices will begin classroom instruction in their junior year of high school and can earn a paraeducator credential and associates degree within a year of graduation. Paraeducators’ work experience can count toward student teaching requirements.

The governor said she would introduce a bill to allow middle- and low-income families and students with an individualized education plan to receive a portion of “per pupil” funds Iowa allocates annually and use it to move their child to the education system of their choice.

“About 70% (over $5,300) of those funds will go directly into an account for families to customize their child’s education,” she said. “The remaining 30% will be distributed by the state to smaller school districts. We want to ensure our small schools stay strong while at the same time empowering parents to choose what’s best for their child.”

Reynolds said the policy of “school choice” can raise the quality of all schools.

“After we expanded open enrollment last session, one superintendent responded by setting the goal of making his district the ‘destination of choice.’ And that is precisely what we want: For every school, public or private, to strive to be the best it can be,” she said. “Because when our schools succeed, Iowa becomes a “destination of choice” for parents everywhere.”

Teachers who have taught throughout the pandemic and will continue teaching next year will receive a $1,000 retention bonus through federal Elementary and Secondary School Emergency Relief funds. Law enforcement and corrections personnel will receive a $1,000 retention bonus through American Rescue Plan Act funds, Reynolds announced.

The House and Senate began meeting Monday. The Condition of the Judiciary will be at 10 a.m. Wednesday, and the Condition of the Iowa National Guard will be at 10 a.m. on Thursday.

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Mary Stroka is a contributor to The Center Square.
Photo “Iowa State Capitol” by Danksergeant15 CC BY-SA 4.0.




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