In an effort to jump start the state’s economy, Iowa lawmakers recently approved an historic tax cut that slashes revenue by more than $2 billion over the next six years. The Republican-dominated legislature pushed the bill through on May 5, which awaits the signature of Governor Kim Reynolds.
“Republicans led on tax reform in 2018,” Reynolds said in a release after the bill was passed. “As a result, hardworking, middle class Iowa families, farmers, small business owners and workers get meaningful relief, all while Iowa’s budget priorities in future years are protected.”
For the first four years, the $2.2 billion bill will focus on reducing income taxes, in addition to tax cuts for businesses. Republicans say the tax cut is crisis proof, and the cuts have built-in safety measures that protect Iowa from budget meltdowns seen in other GOP-led states.
Senator Jim Carlin said the multi-year plan eases into the cuts instead of introducing them immediately. While states like Kansas, which passed a large tax reform bill in 2012, face budgetary ramifications, these tax cuts are tentative. If state revenue does not meet projections, the cuts will not go into effect.
In 2019, the plan will reduce taxes in all income brackets, while dropping the number of brackets from nine to four by 2023. Meanwhile, the top tax bracket percentage will drop from 8.53 to 6.5 percent. The Iowa Department of Revenue estimates that Iowans will save an average of $300 a year, while lower-income residents may only see an annual savings of $18. Those earning more than $1 million annually could approach $25,000.
The bill raises taxes on digital services like Netflix and Uber, and is expected to bring more than $66 million in revenue during the first year.
Democrats strongly opposed the bill, saying cutting taxes on the wealthy will only help large corporationx, while cuts to education and other necessary programs will become inevitable in the future.
Alena Ricci contributed to this report