Personal Taxes

Iowa Senate Republicans are calling for a flat earnings tax of three.6% and finally the entire abolition of personal earnings taxes

Like the House bill, the Senate version calls for the abolition of retirement income taxes. The Senate plan would also lower corporate taxes.

DES MOINES, Iowa — After Gov. Kim Reynolds called for tax reform in her state condition speech, Senate Republicans released their plan on Wednesday.

The Senate proposal echoes calls from House Republicans and the governor to eliminate income taxes on retirement. It would also lower the corporate tax rate by 2% to a flat 7.8%. The House plan does not lower corporate taxes.

The Senate plan calls for a flat individual income tax rate of 3.6% through 2027. He would also restructure the Taxpayer Relief Fund, turning it into an “Income Tax Elimination Fund” to reduce future income taxes and eventually eliminate personal income taxes altogether.

“If fully implemented, this bill will make Iowa’s personal income tax rate the fourth lowest in the state, instead of the eighth highest as it is today,” said Senate Majority Leader Jack Whitver (R-Ankeny). “It will save the average taxpayer $1,590 annually.”

The Senate plan also increases sales tax to 7 percent from 2023 to 2050. The House plan does not.

Senate Minority Leader Zach Wahls (D-Coralville) said Democrats want targeted tax cuts for the middle class.

“Senate Republicans will not solve the Reynolds Workforce Crisis with another tax break for millionaires and big corporations,” Wahls said. “The Republican plan would result in higher taxes for hard-working Iowans and defunding of public education, public safety and health services.”

The house plan was assigned to the Ways and Means Committee. The Senate version is expected to be submitted later this week, and a draft of their plan is below:

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