Iowa’s governor to pursue ‘significant tax cuts’ in 2022
Jack Whitver

DES MOINES — The governor’s budget director says there’s likely to be more than $2 billion in the state’s Taxpayer Relief Fund by this summer.

There’s more than a billion dollars in the fund now. Kraig Paulsen, the acting director of the Iowa Department of Management, said tax collections are ahead of expectations and significantly above state spending plans.

“Six and a half months from now, there’s going to be a pretty significant ending balance and so I think the General Assembly and the governor are in a position to do some really good things for the taxpayers of Iowa,” Paulsen told reporters yesterday after the state Revenue Estimating Conference predicted state tax revenue will grow 3% in the current fiscal year.

In a written statement, Republican Governor Kim Reynolds said the “overcollection” of taxes is “unethical” and she will explore making “significant tax cuts” in 2022.

Senate Republican Leader Jack Whitver of Ankeny has indicated cutting personal income taxes is at the top of the GOP’s 2022 legislative agenda.

“We’re shooting to take another big reduction in the taxes Iowans pay,” Whitver said during an interview with Radio Iowa, “and we want to continue to make us one of the most competitive states in the country.”

Whitver’s ultimate goal is complete elimination of Iowa’s income tax for individuals and couples. Whitver said Republicans would consider reducing the income tax for corporations, if there’s a move to end or reduce refundable tax credits for corporations.

“That may or may not come to fruition,” Whitver said. “We’re focused on the individual income tax rate in the Senate. We have been for five years. That’s where we’re seeing a lot of progress. That’s where we’re seeing a lot of economic growth because the individual income tax rate not only affects every individual person — every single taxpayer, but it also affects most of the businesses in this state.”

That’s because most business owners report the revenue from their business on their PERSONAL income tax returns.

Democrats warn state tax revenue has been boosted by federal pandemic relief and is likely to fall as the tax cuts Republicans previously approved take effect. Senate Democratic Leader Zach Wahls of Coralville said complete elimination of Iowa’s personal income tax would lead to a dramatic increase in the state sales tax.

“Our analysis was you’d have to go up 30 to 32% to make up that revenue, which is obviously a non-starter,” Wahls said. “Not only would that have an enormously negative consequence on middle class families, it’s just not fair.”

During an interview with Radio Iowa, Wahls said Democrats favor targeted income tax cuts for low and moderate Iowans rather than an across the board reduction that yields a higher proportion of relief for the wealthiest Iowans.

“Tax policy, you know, it can be like watching paint dry,” Wahls said. “It can be really tough to follow all the numbers and what have you, but it’s just critically, critically important because that’s ultimately what structures all of the services that so many Iowans depend on.”

Wahls said an overall tax reduction would lead to cuts in state spending on schools and in the Medicaid program that provides health care coverage and other services to 775,000 Iowans.