Iowa Governor Kim Reynolds signed new income tax cuts on Wednesday which will impact over a million residents in the state.
The changes will bring the current income tax in the Hawkeye State down from the current ranges of 4.4 percent to 5.7 percent to 3.8 percent for all starting on January 1, 2025.
"Since 2018, I've proposed, worked with the legislature, and signed four landmark tax reform bills, which not only set the stage for Iowa's first ever flat income tax, but also eliminated taxes on retirement and inheritance income, cut property taxes, and made our code more friendly to farm families," Reynolds, a Republican, said in a press release on May 1.
"And because of our conservative budgeting practices, it's clear that we're well-positioned to go further, faster which is why I proposed a fifth tax package this year."
"The bill I'm signing today allows the flat rate we enacted two years ago to go into effect in 2025, while reducing it yet again to 3.8 percent. The bottom line is that every Iowa taxpayer will experience significantly lower rates starting next year, and collectively, all the tax cuts we've enacted since 2018 will save Iowans more than $23.5 billion over a decade," she added.
Newsweek contacted Reynolds' office for comment by phone on Thursday morning but didn't receive an immediate response.
Through this initiative, Iowa is set to become one of 13 states which already have or are still implementing flat income taxes. The other 12 are Arizona, Colorado, Georgia, Idaho, Illinois, Indiana, Kentucky, Michigan, Mississippi, North Carolina, Pennsylvania and Utah.
Some of these states—Illinois, Indiana, Michigan and Pennsylvania—have always had flat income taxes. Colorado implemented it in 1987. North Carolina did so in 2014, and Kentucky in 2019. Arizona, Idaho and Mississippi implemented flat income taxes in 2023. Georgia did so earlier this year, when Governor Brian Kemp approved legislation cutting the state's income tax from 5.75 percent to 5.39 percent. The new rate will take effect in 2025.
The tax cuts signed into law by Reynolds were supported by nearly a third of legislative Democrats, KCRG reported, though Democratic leaders said the cuts won't help half a million Iowans who don't earn enough money to even pay income taxes.
An initiative to introduce a one cent sales tax cut proposed by Democrats wasn't backed by Republicans in the state legislature.
The flat income tax is expected to affect over a million taxpayers in Iowa. According to 2020 data from the Iowa Department of Revenue, $3.9 billion was reported in the state in individual income tax liability on 1.7 million returns for that tax year filed in 2021.
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Giulia Carbonaro is a Newsweek Reporter based in London, U.K. Her focus is on U.S. and European politics, global affairs ... Read more
