DES MOINES, Iowa — A newly-proposed bill that would cut income taxes is eligible for debate on the Senate floor after passing out of subcommittee and committee Thursday.
Republican lawmakers in the House and Senate proposed accelerating cuts to the flat income tax rates beginning Jan. 1, 2025.
The current tax rate is 5.7%, and SSB 3207 would lower that by almost 2% — to a flat income tax rate of 3.8% by 2025.
Previously, Gov. Kim Reynolds signed a law that would cut income tax rates to just under 4% by 2026.
"Ultimately, we all want to get some more money back in taxpayers with this proposal right here," said Sen. Dan Dawson, R-Pottawattamie County. "We still keep a lot of those moneys in the balance and that way it still gives us an opportunity to come back next year, and the year after to cut more taxes and think more long-term view of how we want to use it."
Dawson believes this acceleration will return an additional $1 billion back to taxpayers.
"Part of our initial goal was to find a way to grow some of those moneys in the taxpayer relief fund, and with this plan right here it preserves a lot of those moneys, so we still have that option to come back next year," Dawson said.
The main goal Republican lawmakers had for this proposal, was to lay the foundation for a long-term plan. Their ultimate end goal in the coming years is to decrease the flat tax rate to zero.
"The reality is we knew we could make a decision right now, at least get some of those moneys back, still having enough cushion to fund all our priorities to the state budget, and still come back next year and figure out more creative ways and how we can lower that rate further for Iowans," Dawson said.
Gov. Kim Reynolds released the following statement after the bill was proposed:
“Cutting taxes has been a priority of mine since taking office, and I’m pleased that the Senate has introduced an income tax cut that further reduces and accelerates the implementation of a flat tax rate that will benefit every Iowan who pays income tax. This was a key piece of the tax reform bill I proposed this year, and this common-sense compromise will allow hard-working Iowans to keep more of what they earn in every paycheck. Government should collect only what it needs to serve its people and allow them to keep the rest.”
Lawmakers are hopeful to see this bill reach the debate floor in the final days of the legislative session.