(The Center Square) – The tax cut package signed by Governor Kim Reynolds and the realignment of mental health funding is described as a major achievement by Republican lawmakers of Iowa.
Senate Act 619 Adopted May in an extended term to specifically address tax issues and was signed by the governor on Wednesday.
"Today the Iowa Senate made Iowa more competitive," Senate majority leader Jack Whitver, R-Ankeny, said last month. “Lowering the highest income tax rate to 6.5% means Iowa families will keep more of the money they make. Lower income tax rates make this state more attractive to small businesses and people looking for a new home, ”he said.
“The exit from inheritance tax ends the unjust practice of taxing the dead. The abolition of the mental health fee finally offers real wealth tax relief for Iower. Iowans has asked for tax breaks and the Iowa Senate has answered those calls, "added Whitver.
Senator Dan Dawson, R-Council Bluffs, chair of the Ways and Means Committee, agreed.
"Senate Republicans pledged bold tax reform when the January session began and this bill was tabled," he said. "This bill includes the removal of tax triggers, the abolition of inheritance taxes, tax breaks for small businesses, and tax cuts for families in Iowa." Senate Act 619 is the tax bill Iowans deserve, and I am proud that the Senate does it from Iowa. "
However, Senate minority leader Zach Wahls, D-Coralville, commented on his blog at the end of the session that this year was a failure.
“With our Build Back Better plan, the Iowa Democrats have tabled more than two dozen bills to help Iowans get back on their feet. Unfortunately, Governor Reynolds and the Republicans chose not to partner with us on these proposals. ”Wahls says their ideas have ensured long-term economic growth.
Democrats and Republicans largely agree on the pros and cons of the 2021 session; Likewise, the votes on the tax law closely followed the party lines. Senator Pam Jochum, D-Dubuque, backed most of the bill's provisions, but transferring mental health funding to the state was a deal-breaker.
Jochum told The Center Square the outcome will reduce funding for the 14 mental health regions. Mental health regulations will change regional property tax funding to nationwide support over the next two years. Jochum said a system that has been around for a long time will not work well at the state level: "It's better to give it to the people who are closest to the situation."
Jochum says she takes psychiatric care very seriously and personally. Her mentally handicapped daughter Sarah died two years ago as a result of a fall over the stairs. Still, she believes the mental health dollars may not go down: "I really hope I'm wrong, but right now I think it won't work out the way they suggested."
Of course, the dollars saved are of great importance to everyone involved. It is estimated that the tax savings for individuals will be $ 1 billion over the next 10 years. That's about $ 125 million a year. Annual savings per person are projected to be $ 40.
Of course, figuring out what will win a particular family or company is very different.
Dr. Ernie Goss is a regional economist who oversees the monthly report on business conditions for Central America.
Goss doesn't downplay the total benefit of $ 1 billion over 10 years, even if $ 40 may sound like insignificant. And he told The Center Square that there are so many provisions in the law that it doesn't give consumers a proper view of what it will mean to them.
Jochum thinks the bill is simply too massive and should have been broken down into smaller pieces. She says she could have voted for many of these pieces.
Kristine Tidgren, director of the Iowa State Center for Agricultural Law and Taxation, wrote on an Iowa website that the legislation contains eight key provisions and 18 additional ones. In other words, Goss adds, the average person would need a tax advisor rather than an economist to fully explain the implications.
Still, Goss sees some of the provisions as positive for economic growth. It is helpful to move mental health costs from local property taxes to the national level. “Probably a good change and needs to be done. Property taxes can be very burdensome. I owned a house in Iowa. "
Goss also says that getting rid of federal taxes as a deduction from taxes in Iowa was a smart move. This earlier wording apparently left Iowa with a greater tax burden than other states that have already dumped that deduction. This makes the state less attractive for internal expansion and external investment. In particular, neighboring Missouri and South Dakota have lower tax rates than Iowa.
Hawkeye state joins three other states that have cut income tax rates since the pandemic began: Idaho, Oklahoma, and Montana. These data come from the tax foundation.
Compare that to New York, where the pandemic barely affected tax revenues. However, Albany recently increased tax rates for both individuals and businesses. Governor Reynolds says she will seek further tax cuts in the 2022 legislatures.