(Des Moines, Iowa) Iowa Governor Kim Reynolds signed the tax reform bill, Senate File 2417, into law Wednesday at tablet manufacturer MobileDemand in Hiawatha. Senate File 2417 represents historic tax reform for Iowa families, farmers and small business owners.
“141 days ago, I promised Iowans in my Condition of the State address to find a way to pass tax reform this session so people could keep more of their hard-earned dollars,” Reynolds said. “Today – thanks to strong leadership and unified teamwork – that promise became a reality.”
The governor went on to say the new tax plan will unleash opportunity across the state and help families struggling to make ends meet.
“I signed this bill for every Iowan who works hard to earn a paycheck and deserves to keep more of it,” she continued. “It’s one of the reasons why I feel so strongly that government must never forget that it’s the people’s money they’re spending.”
Iowa’s corporate tax rate of 12 percent, which is the highest in the nation, will be lowered to 9.8 percent (which is still high). The law provides additional tax relief for Iowa businesses and farmers that is phased-in over time by increasing Section 179 expensing and the Qualified Business Income (QBI) deductions. Iowa’s sales and use tax will be modernized by taxing many digital sales, making the competition fairer between online retailers and traditional brick and mortar businesses. That, however, does not benefit consumers.
Individual rates will be reduced in 2019, including a cut of the highest rate from 8.98 percent to 8.53 percent. If enough revenue growth is realized by the state in future years ($8.3 billion by FY 2022 amounting to 4 percent growth each fiscal year), tax rates will be reduced further, with the top individual rate reduced again to 6.5 percent and reduce the number of tax brackets from nine to four. Federal income tax deductability will also be eliminated if Iowa reaches that revenue trigger.
The tax reform bill passed the Iowa Senate on May 5, 28-20 and the Iowa House on May 5, 54-32
