DES MOINES, Iowa — Monday evening, the Iowa Senate passed a tax bill 29-15 that aims to save taxpayers more than $1 billion over the next eight years.
The bill, Senate File 619, now heads to the House for consideration.
Republicans praised the bill, highlighting the removal of triggers from the 2018 tax reform bill.
A fact sheet from Senate Republicans says removing the tax system trigger "would accelerate the contingent tax system from assumed 2024 to an unqualified effective date of January 1, 2023."
The number of tax brackets would be reduced to four with the top rate being reduced to 6.5% from 8.53%. Also, federal deductibility would be repealed under this bill.
The fact sheet says, "Because of federal deductibility, Iowa's tax rates are some of the highest tax rates in the nation. Eliminating federal deductibility will improve our tax rate and will make us more attractive to job creators."
In short, the Republicans say this will provide "greater simplicity" for Iowans.
Another piece of the legislation involves Child Care Tax Credits. The bill would increase the maximum net income amount used in determining eligibility for the Early Childhood Development and Child and Dependent Care Tax Credits.
The maximum is doubled under this legislation from $45,000 to $90,000. The change would be retroactive to tax years beginning on or after Jan. 1, 2021.
The bill also aims to exempt COVID-19 grant money and Paycheck Protection Plan loans from state income tax.
Also addressed in this legislation is mental health funding.
The bill would eliminate the current mental health property tax levy over two years starting in the fiscal year 2022 "while at the same time providing a long-term sustainable source of funding for mental health services using state dollars," according to the fact sheet.
The legislation would give the Iowa Department of Human Services oversight over funds and oversight over the new disability services incentive payments.
Senate Democrats criticized the portion of the bill covering the "backfill" of commercial and industrial property tax replacement payments.
The fact sheet from Republicans says the bill will "phase-out the backfill over a five-year and an eight-year phase-out and so the backfill will be eliminated at $0 at year five and eight starting in FY 23."
Sen. Sarah Trone Garriott, D- Windsor Heights, tweeted the legislation takes advantage of one-time federal relief dollars.
Senate Minority Leader Zach Wahls, D-Coralville, quoted one of Garriott's tweets saying "Republicans vote on a party-line basis to raise property taxes across Iowa."
Republicans claimed the bill will make Iowa more competitive.
“Today, the Iowa Senate made Iowa more competitive. Reducing the top income tax rate to 6.5% means Iowa families will keep more of the money they earn. Lower income tax rates make this state more attractive to small business and people looking for a new home,” said Senate Majority Leader Jack Whitver, R - Ankeny. “Phasing out the inheritance tax ends the unjust practice of taxing the dead. Eliminating the mental health levy finally provides actual property tax relief for Iowans. Iowans asked for tax relief and the Iowa Senate has answered those calls.”
Watch: Iowa lawmakers look to crack down on human trafficking at massage parlors