This week on The Caffeinated Thoughts Podcast, Shane Vander Hart discusses the Iowa Working Families Tax Relief Act (SF 2383) that passed in the Iowa Senate 29 to 21 with Drew Klein, the Iowa State Director for Americans for Prosperity. They also discuss the tax reform bill introduced in the Iowa House of Representatives (HSB 671).
Here are some of the highlights of how SF 2383 impacts Iowa’s individual income tax, corporate income tax, and sales tax:
Individual income tax:
- Reduces the number of tax brackets from nine brackets to five.
- Reduces the top rate of 8.98% to 6.60% (and eventually to 6.30%).
- Eliminates federal deductibility.
- Changes starting point of state income tax calculation to “federal taxable income”.
- Doubles retirement income exemption from $10,000 to $20,000.
- Alternative Minimum Tax (AMT) is eliminated.
- Beginning in 2023, tax rates would be indexed to inflation and be reduced each year.
Corporate income tax:
- Maintains four tax brackets.
- Top rate drops from 12.0% to 10.0%. (In 2023 the top rate drops to 7.0%)
- Eliminates federal deductibility.
- Many corporate tax credits are reduced, eliminated, or otherwise reformed.
- Credit unions would now be taxed the same as banks.
Sales tax:
- Sales tax would be collected on digital downloads, services, and subscriptions that are now not taxed.
- Requires out of state online retailers to collect and remit Iowa sales tax.
The Legislative Services Agency expects a $1 Billion loss in state revenue as a result of this bill. Klein discusses state spending and how Iowa can afford the tax reform bill.
Klein encourages our listeners to visit IATaxReform.com to contact state legislators.
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