ITR Foundation recently traveled to Muscatine to discuss Amendment One and answer questions about the proposed constitutional amendment. Joining the conversation was our Senior Tax Fellow Tom Sands, who brought firsthand experience with Iowa tax policy after serving 14 years in the Iowa House of Representatives, including six years as chair of the House Ways and Means Committee.
Amendment One asks Iowans whether future increases in income tax rates should require broader agreement in the legislature. Amendment One would require a two-thirds vote in both the Iowa House and Iowa Senate before the legislature could:
The proposal was approved by two consecutive General Assemblies, as required for an amendment to the Iowa Constitution, and will now be in front of voters on November 3. A “yes” vote would add the two-thirds requirement to the Iowa Constitution. A “no” vote would preserve the existing system.
Amendment One would not automatically reduce or eliminate Iowa’s income tax. It would not prevent lawmakers from raising an income tax rate, but it would increase the number of votes required to do so.
The amendment also would not:
Amendment One only applies to state individual and corporate income tax rates. It does not govern how Iowa funds education or health care. It does not apply to property taxes or local government budgets. Any future changes in those areas would still require separate decisions by the appropriate state or local officials.
Supermajority requirements already exist elsewhere in federal, state, and local government. In practice, most legislation in the U.S. Senate requires 60 votes to overcome a filibuster. Overriding a presidential veto requires a two-thirds vote of both chambers of Congress, while overriding an Iowa governor’s veto also requires two-thirds of each chamber. Most Iowa gubernatorial appointments require confirmation by two-thirds of the state Senate, and local bond proposals generally require approval from 60 percent of participating voters.
Those examples involve different governmental decisions, but they illustrate the principle of requiring broader agreement before taking certain actions. Amendment One would apply that principle to increases in Iowa’s individual and corporate income taxes.
The two-thirds threshold would remain in effect during an economic downturn, natural disaster, public-health emergency, or other crisis. The amendment contains no emergency exception. That does not mean an income tax increase would be impossible during an emergency. If two-thirds of the members of both legislative chambers supported an increase, the measure could still pass.
Iowa’s experience during the Great Recession also shows that an income tax increase is not the state’s only possible response to financial pressure. During that period, state leaders used reserve funds and reduced spending rather than increasing individual income tax rates. Amendment One would not dictate how lawmakers make decisions or govern. It would only establish the number of legislative votes required for the income tax changes covered by its language.
The amendment would apply the same two-thirds voting requirement to both individual and corporate income tax rates. It would not provide corporations with a new tax reduction, credit, exemption, or special classification. It also would not distinguish between large publicly traded companies and smaller businesses or family farming operations organized as corporations.
The same principle applies to individual taxpayers. The majority of Iowans who file an income tax return report income of less than $50,000, and more than three-quarters report income below $100,000. Amendment One would apply the same legislative threshold regardless of a taxpayer’s income.
Whether an Iowan has $25,000, $100,000, or $1 million in taxable income, the legislature would face the same constitutional requirement before increasing the income tax rate that applies to that taxpayer. Amendment One treats taxpayers equally. Raising an income tax rate would require the same two-thirds vote regardless of how much someone earns.
Our discussion in Muscatine provided an opportunity to move beyond some of the broader claims surrounding Amendment One and focus on the specific change voters are being asked to consider. The amendment would not determine future tax rates, spending levels, or budget priorities; those decisions would remain with Iowa’s elected officials. On the heels of visiting Okoboji the week before, we enjoyed getting a chance to be in Eastern Iowa.
Amendment One does not settle every debate over Iowa’s tax system. It does not determine how much the state should spend, how existing revenue should be allocated, or what Iowa’s income tax rates should be in the future. It presents a narrower question: Should an increase in an individual or corporate income tax rate, or the creation of a new state tax measured by income, require approval from two-thirds of both chambers of the Iowa Legislature? That is the specific decision Iowa voters will make on November 3.
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