“The headline of this session is simple: Iowa’s income tax rate will be the 6th lowest in the country…”
The Iowa legislature has adjourned, and this session has resulted in some important pro-growth policy victories that provide further tax relief to Iowans, while also making Iowa’s economy more competitive and government more efficient. As Senate Majority Leader Jack Whitver said, “The headline of this session is simple: Iowa’s income tax rate will be the 6th lowest in the country…” Additionally, the legislature enacted policy reforms in response to the failure of the federal government to protect the sovereignty of the United States, and they took an important first step in reforming and strengthening civic education in Iowa’s public school system.
Income Tax: Starting in 2025, Iowa will have a flat 3.8 percent income tax rate. This represents a taxpayer savings of more than $1 billion as Iowa will move from a progressive income tax structure with a top rate of 5.7 percent in 2024 to a flat 3.8 percent rate next year. This is an acceleration of the flat tax implementation, which was previously scheduled to be fully phased in at 3.9 percent in 2026.
Two-Thirds Majority Requirement: The first of two proposed constitutional amendments, this resolution would require a two-thirds vote of both houses of the legislature to increase the income tax. This important taxpayer protection would force future legislatures to not only build a consensus in order to increase the income tax but also to restrain spending. Several states currently have legislative supermajority requirements to raise taxes.
Constitutionally Protect Flat Tax: This resolution is a proposed constitutional amendment that would guarantee that Iowa maintains a single tax rate, a flat tax. Starting in 2025, Iowa will have a 3.8 percent flat tax and this amendment, if approved, would ensure that a future legislature could not reestablish a progressive or multi-rate income tax system. A flat tax is more beneficial and fairer for all taxpayers.
Prohibit Universal Basic Income (UBI): Property taxes are a major concern for Iowans and the legislature just added an important protection on that front by passing a measure that prohibits local governments from implementing a universal basic income (UBI) program. Several cities within Polk County have implemented a pilot program currently using grant dollars and federal COVID stimulus funds to provide a universal basic income to qualified recipients. UBI is a dangerous policy, especially at the local level, because it would create a massive entitlement program, which would be costly and lead to property tax increases. Moreover, UBI fosters government dependence, discourages work, and is fundamentally socialist.
Boards and Commissions Consolidation: Last year, the legislature passed a comprehensive state government reorganization measure, which consolidated cabinet agencies and started the process of making government more efficient and accountable. Part of that reform was the creation of the Boards and Commissions Review Committee, which spent the summer of 2023 reviewing Iowa’s numerous boards and commissions. The Committee reviewed all 256 boards and commissions and recommended that 111 be consolidated or eliminated, which would be a 43 percent reduction. Governor Reynolds introduced a bill that would have consolidated or eliminated 111 boards and commissions. While the Senate passed the Governor’s bill, the House narrowed the list and the final bill only eliminated 74 and consolidated nine boards and commissions. In response to the bill passing, Governor Reynolds stated, “The bill headed to my desk today is a continuation of that work. It eliminates unnecessary and redundant boards and commissions, returning accountability to the people of Iowa through their elected representatives. Iowa’s boards and commissions have never been comprehensively reviewed and adjusted for effectiveness, only growing in numbers and scope over our state’s history. Today, we reverse that trend.” This is the first extensive attempt to review Iowa’s numerous boards and commissions, and while the measure fell short of the Boards and Commissions Review Committee’s recommendation, the legislation does create a review process for the legislature to have an ongoing oversight role in reviewing the existing boards and commissions. This legislation is an important continuation of reforming state government and making it more accountable to the taxpayer. “Government works for the people, not the other way around. We should be consistently reviewing and improving the quality of services we provide,” stated Governor Reynolds.
Regulatory Reform: Regulations are more than just rules; they are a hidden tax and can be costly. Regulations can stifle economic growth and entrepreneurship, and over time they build up if they are not reviewed on a regular basis. Last year, Governor Reynolds started the process of reducing Iowa’s regulatory burden when she issued an executive order requiring a review of Iowa’s regulations. Building on this, the legislature passed a regulatory reform measure, which “cuts red tape and improves Iowa’s regulatory environment, requires a regulatory analysis of all new rules, and sunsets rules unless they undergo a substantive review and are re-adopted at least every five years.” These reforms will help reduce Iowa’s regulatory burden, but more work is needed. One reform that was eliminated from the Governor’s reform bill was agency deference. Under current law, when a rule or regulation is challenged, the courts defer to the agency that wrote the rule. This empowers the administrative state or bureaucracy, and it also defies important constitutional principles such as separation of powers and checks and balances. It is also a fairness issue. Agency deference is one area that policymakers must address in a future legislative session.
Foreign Ownership of Land: In response to the growing concern about foreign ownership of land, especially farmland, by adversaries such as communist China, the legislature passed one of Governor Reynolds’s priorities of the legislative session. The legislation builds on Iowa’s current laws that regulate foreign ownership of land. Specifically, this “further protects Iowa land by increasing reporting requirements, giving the Attorney General subpoena power to investigate potential violations, and strengthening penalties for foreign owners.”
Reforming and Strengthening Civic Education: For decades, a crisis has existed in civic education. Students across grade levels do not have an adequate understanding of American History, Government, and Western Civilization. Often, civic education in public schools has become politicized or replaced by multiculturalism or world history. The legislature passed a measure that begins to reform the History curriculum and requires not only a review of standards but also that classes must cover important figures, events, and documents from American History, Western Civilization, and Iowa History. It also requires students to learn about the structure and process of the federal and state governments, among other reforms. This is an important reform that begins to strengthen and make History an important and essential part of the curriculum.
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