Tax cutting takes backseat to education issues

DES MOINES — A key state senator says the debate over the future of Iowa’s Area Education Agencies, teacher pay and general state funding for schools has delayed decisions on tax policy.

Republican Dan Dawson of Council Bluffs is chairman of the Senate Ways and Means Committee.  “To the big income tax question, we really need to get a budget and figure out what our spending requirements are and what we can return back to taxpayers,” Dawson says.

Dawson says the longer it takes to resolve differences among Republicans in the House and Senate on state spending issues, it’s more likely the 2024 legislative session will end without passage of another cut in the state income tax.  “Iowans are still going to get an income tax cut next January and they’re getting one the year after that,” Dawson says. “When we passed the largest tax cut in Iowa history in 2022, that was a four year plan, so even walking out and not having some of these issues resolved, Iowans are still getting tax cuts the next two years.”

In January, Governor Reynolds said with billions in Iowa’s Taxpayer Relief Fund, the individual income tax should be reduced more. Dawson has proposed a different idea — investing that money and using any profits to gradually reduce Iowa’s income tax, until it’s eliminated several years from now.  “I think there’s two perspectives on how to use those monies in the Taxpayer Relief Fund,” Dawson says. “You could send a one-time check out to Iowans, right? And that’s essentially what the governor’s proposal would do is just try to get that money out as soon as possible to Iowans, but it gets back to ‘What’s your long term vision?'” Dawson says his plan would avoid the misstep of cutting taxes too much, too quickly — sending the state’s budget into a tailspin.

Representative Dave Jacoby of Coralville is the top-ranking Democrat on the House Ways and Means Committee. He suggests the governor’s retroactive tax cut to the beginning of this year is a gimmick.  “To be blunt about it, sending a check back in a short term thing in an election year seems a little convenient to me,” Jacoby said.

Jacoby says lawmakers from both parties need to know the full impact of previously approved tax cuts before approving more. “We have not sat down to review everything we’ve done since the 2013 property tax cut bill, the 2017 and 2018 tax cut bills,” Jacoby says, “and also what we’re doing now on income tax.”

Jacoby says Democrats favor tax cuts targeted to working Iowans and he says the current law that shrinks Iowa’s income tax to a single flat tax delivers a bigger tax break to the wealthiest Iowans.

Jacoby and Dawson made their comments during taping of “Iowa Press” that aired over the weekend on Iowa P-B-S.