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Gov. Reynolds backs $2B tax cut with changes to income tax rates

The Iowa governor outlined her priorities for the 2022 legislative session during her annual Condition of the State address Tuesday evening.

DES MOINES, Iowa — Surrounded by fellow lawmakers, Iowa Gov. Kim Reynolds outlined her priorities for the 2022 legislative session during the Condition of the State address from inside the capitol Tuesday evening.

One of those priorities is a proposal that would cut taxes by nearly $2 billion by moving to a 4% flat income tax phased in over four years. It would also repeal all state taxes on retirement income beginning next year. 

The flat tax proposal is expected to reduce state revenue by $1.58 billion in tax year 2026 when it is fully implemented. The retirement tax relief is estimated to cost the state $400 million in revenue in 2023, the first year she proposes it to be effective.

The Republican governor also touched on the state's workforce crisis, claiming there are "many more job openings than Iowans on unemployment" during her speech. 

"Unemployment benefits serve an important purpose as a short-term safety net for Iowans who are unexpectedly out of work, through no fault of their own. But we can’t forget these are taxpayer funds, and we have to recognize that we’re living in a time of prolonged low unemployment," Reynolds said. 

Iowans currently have six months to collect unemployment benefits while they look for a new job.  

"Frankly, that's more time than necessary," the governor said. "I’ll be introducing a bill that lowers benefits to 16 weeks—about four months—and ensures that those collecting unemployment can’t turn down suitable jobs while living on taxpayer funds."

Lastly, Reynolds announced teachers, law enforcement officers and correctional officers in the state will receive $1,000 retainment bonuses for their hard work during the COVID-19 pandemic. 

The bonuses for teachers will be funded with federal Elementary and Secondary Emergency School Relief (ESSER) funds, according to Reynolds. The bonuses for officers will be funded through the American Rescue Plan Act (ARPA), which is also from the federal government. 

The Associated Press contributed to this reporting. 

Watch the full speech on YouTube

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