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Iowa lawmakers’ $2 billion tax cuts put services ‘at risk’

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May 20th, 2024 by Ric Hanson

(Iowa News Service) – The latest state tax cuts are expected to cost Iowa more than 2-billion dollars over the next two years. Advocates for tax fairness argue lawmakers are not considering the long-term consequences of those cuts on schools, workers, and livability. In the face of a dwindling population and shrinking tax base, Iowa lawmakers doubled down on tax cuts this year, and also passed a measure calling for a constitutional amendment to require any state income tax to be a single rate. Anne Discher with Common Good Iowa says lawmakers chose to cut taxes despite the state’s growing economic demands – like funding Educational Savings Accounts, which allow parents to use public education dollars to pay for private school.

Lawmakers also passed a cluster of bills that will accelerate cuts in the state income tax rate, from 3-point-9 to 3-point-8 percent, which Discher argues will have long-term economic impacts. Supporters of the tax-cut measures, including Governor Kim Reynolds, have promised more fiscal austerity.

The deeper tax cuts mean an average reduction of about 6-dollars to someone in the bottom 20-percent of the income bracket, 402-dollars for the middle 20-percent, and more than 20-thousand dollars for someone making over a million-and-a-half dollars a year. Lawmakers say they plan to cover the tax cuts with Iowa’s budget surplus, which Discher calls shortsighted.

Discher argues implementing a flat-rate income tax would be regressive and hurt lower-income Iowans most. Supporters say it would be more fair and efficient.