From a taxpayer perspective, the 2022 legislative session is off to a good start. Governor Kim Reynolds and both the House and Senate Republicans have proposed pro-growth tax reform plans that would lower Iowa’s income tax rates.
Governor Kim Reynolds 4.0% flat rate by 2026
House Republicans 4.0% flat rate by 2026
Senate Republicans 3.6% flat rate by 2027
All three proposals build on tax reforms that have been enacted since 2018 and would simplify the tax code making it more competitive.
Both Governor Reynolds and the Senate Republicans plan would also reduce the corporate income tax rates while simplifying the brackets. The House Republicans plan would leave corporate tax rates unchanged.
Governor Reynolds and the legislature deserve credit for making tax reform a priority. It remains to be seen which aspects will be included in the final tax reform bill, but as of now it appears that Iowa taxpayers may be witnessing a historic year for income tax relief. Iowa is on the road to becoming a national pro-growth tax reform leader.
Remote learning caused by COVID restrictions shed a light into the classroom, affording parents a front row seat to what was being taught. Many parents disagreed with what they were seeing. Once students returned to in-person learning, districts were taking medical freedoms away through mask mandates. The start of the current school year launched on-going debates about gender issues, bathrooms, and lewd materials on the shelves of school libraries sparking parents to speak out.
During last year’s legislative session, Iowa took several strides in delivering expanded school choice by passing most of the education reforms introduced by Governor Kim Reynolds. The gold standard of parental choice, an Education Savings Account (ESA), remains just out of reach in Iowa, though.
ESAs would allow all parents to spend their child’s share of state educational funding at the public or private school of their choice. Nationwide polling in December showed 81% of school parents support ESAs. Our own polling from earlier in the fall reflected support for ESAs from a majority of Iowans, and with good reason. In addition to finding the right fit for a student’s education, school choice programs have been proven to save considerable taxpayer dollars.
One of the arguments drummed up by those opposing school choice is that public dollars shouldn’t go to private entities. That myth is debunked. We already do that with Pell Grants, SNAP, Medicaid, and the Iowa Tuition Grant.
Beyond a discussion about dollars, we need to examine the impact public education is having on Iowa’s students. A recent family I met with is trying to find a way out of their current public school district in Central Iowa. What is driving them away? The junior high’s policy about who can use bathrooms designated for girls. This fact points us to a need for real school choice that acknowledges one size does NOT fit all.
Iowa is fortunate to have Governor Reynolds as a vocal supporter of school choice. As part of her 2021 education legislation, she proposed the creation of ESAs that would have been available to a certain segment of Iowa students. In the interim, she became the first governor in the country to sign the Education Freedom Pledge which promotes, among other items, a parent’s right to use taxpayer-funded education dollars on the schooling of their choice. And in her Condition of the State address to kick off 2022’s legislative session, Governor Reynolds outlined a proposal for an even broader ESA program than what she proposed last year.
With a popular governor exploring ways to deliver more choice to Iowa parents, and two legislative chambers that have taken their own steps to do the same, the future for ESAs in Iowa should be bright.
Iowans for Tax Relief Foundation has been a consistent voice against the dangers of a growing federal deficit and the strings that are often attached to money from Washington, D.C.
The best way to push back against Washington’s overreach is to empower citizens with more opportunity and financial freedom so that they aren’t dependent on stimulus checks and other programs from the federal government. Iowa’s state and local governments received more than $2 billion dollars from the American Rescue Plan Act. Elected officials now have to choose between using those funds in a fiscally conservative way that restrains spending growth and cuts taxes, or using them in a way that will put citizens on the hook for big government spending increases in the future.
At the state level, legislators should continue their work to deliver broad-based, permanent income tax cuts. While setting the state’s 2023 budget, extra discretion will need to be used to responsibly handle the influx of federal stimulus money, including following the cardinal rule of not using one-time money for ongoing expenses. The House and Senate could also give additional power to taxpayers by requiring local governments to utilize the direct notification aspect of a truth-in-taxation measure, enhancing the property tax reforms that were passed in 2019.
The local level is where ARPA plans may get really interesting so we’ll cut right to the chase: some local leaders mistakenly believe they cannot use ARPA funds to cut property taxes. This misunderstanding likely stems from a controversial ARPA provision that attempted to stop state governments from using the relief funds for tax cuts. While that issue is still being settled in the courts- in fact, a federal judge blocked the controversial provision last fall- there has NEVER been a similar constraint on local governments. Sources as varied as the National League of Cities and Tax Foundation have both stated that there is not a prohibition on local governments cutting taxes.
City and county officials should keep local property taxpayers top of mind as they make budget decisions with this influx of federal money. No option should be taken off the table because of a misunderstanding or misstatement of the law. If you want to start a conversation with your local officials about property taxes, or if you want to see how your local governments have been growing, head to ITRLocal.org.
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