(Radio Iowa) – A plan to shrink Iowa’s personal income tax to one rate of three-point-nine percent by 2026 has cleared the Iowa legislature with the votes of 89 Republicans and four Democrats. The bill also eliminates the state tax on retirement income and creates a new tax break for retired farmers. Senator Dan Dawson, a Republican from Council Bluffs, says state tax revenues have soared above expectations and it’s time to seize the opportunity.

“Our state is charting a new way forward wherein, for the first time, we are treating all Iowans’ work fairly and equally by enacting a flat tax,” Dawson says. Representative Lee Hein, a Republican from Monticello, guided the bill through House debate. “We can deliver, tonight, the largest tax cut in Iowa history,” Hein said, “while continuing to deliver Iowans’ priorities.” Democrats say the state has excess cash on hand because of the influx of federal pandemic relief money. Others, like Senator Pam Jochum, of Dubuque, say a flat tax primarily benefit the wealthy — and trickle down economics doesn’t work.

“Whether you like it or not, this tax plan — the governor’s tax plan — is going to shift the tax burden to those who can least afford it,” Jochum said. Representative Lindsey James, a Democrat from Dubuque, says Iowans living paycheck-to-paycheck will get little, if any benefit. “It will take the average Iowan a century to receive the same tax benefits that the ultra rich will receive in a single year,” James said.

Democrats accused Republicans of rushing the bill through because Governor Kim Reynolds will be giving the Republican response to President Biden’s State of the Union Address Tuesday night. “Everybody knows why we’re debating this bill today, because our governor is going on the national stage next week, bragging about the tax bill.” That’s Senator Tony Bisignano, a Democrat from Des Moines who voted for the bill because it eliminates the tax on pensions and other retirement income.

Governor Reynolds issued a written statement last night, using words like bold and transformative to describe the bill, which she intends to sign in the next few days. House Speaker Pat Grassley says the bill sped through the legislature yesterday (Thursday) because it’s a priority.  “We’re Republicans,” Grassley says. “We want to sustainably provide tax relief to Iowans.” Senate Majority Leader Jack Whitver, a Republican from Ankeny, says the plan has been in development for six months and makes Iowa’s personal income tax rate fourth lowest in the nation.

“We have a surplus in Iowa and when Republicans have a surplus in Iowa, we’re going to give it back to the taxpayers,” Whitver says, “and so this is delivering on what we have told voters over the last year.” The bill sets up a mechanism that could shrink the state’s corporate income tax to a single rate of five-and-a-half percent, but the bill also reduces some business tax CREDITS that are refundable. Whitver says that’s a remarkable step forward. “There are lobbyists that are paid here to protect all those carve-outs,” Whitver says, “so it’s just a determination from the House, the Senate and governor to do what’s right and reform the system.”

Representative Dave Jacoby, a Democrat from Coralville, says reducing the state’s research activities credit may be the wrong move. “Research and development are so important in the state of Iowa,” Jacoby says. “…I think we’re taking from one silo and putting into another and rolling the dice.”

The centerpiece of the bill, however, is the reduction in personal income taxes. Republicans say every single Iowan will have more money in their pockets as a result. Democrats say a Department of Revenue spreadsheet indicates 30 percent of tax filers will not see any reduction in their income taxes.