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Statehouse Democrats propose exempting up to $10,200 in unemployment benefits from income taxes

DES MOINES — Democrats in the Iowa legislature are proposing a tax break at the state level for the expanded unemployment benefits congress approved during the pandemic.

House Democratic Leader Todd Prichard of Charles City says it would mean the additional 600-dollars in jobless benefits approved last summer would not be subject to state income taxes. “This is a no-brainer,” Prichard says. “The Covid crisis…should be the focus. It is the issue of the day that we should be dealing with to help Iowans through this.”

Congresswoman Cindy Axne, a Democrat from West Des Moines, is making a similar proposal in the U.S. House — to exempt up to 10-thousand dollars of unemployment benefits from FEDERAL income taxes. Axne says tens of thousands of Iowans are affected.  “As the tax deadlines for 2020 near, there is a potentially devastating tax bill waiting for those Iowans,” Axne says. “Since unemployment benefits are subject to income taxes, Iowans in need will find these benefits on their tax bill this spring.”

Axne joined Democrats from the Iowa House and Senate to discuss these proposed tax breaks at the state and federal level. Senate Democratic Leader Zach Wahls of Coralville says businesses that got federal Paycheck Protection Program grants aren’t paying income taxes on that money. “We just want to make sure that we’re providing this fairness for worker who lost their jobs in the same way,” Wahls says.

Wahls says many Iowans filed for unemployment benefits for the first time in their lives and may not have known that money was subject to income taxes.

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