Taylor's News from the Hill: Tax Cuts for Iowans Passed in the Iowa House

Since the first week of the 2013 session, Republicans have been working on ways to leave more money in Iowans’ pocketbooks. House Republicans recognize that now is the time for serious, meaningful tax relief.

We are not dug in on any one idea on tax relief; we want to be able to talk about several options. While we’re still focused on property tax relief and other reductions in taxes, House File 478 (formerly House File 3), reducing Iowans’ income taxes, was considered on the House floor this week.

This bill does the following for the taxpayers of Iowa:

• Gives Iowans a choice when paying their income taxes, either the current       system or a 4.5 percent flat tax with zero deductions or credits. No one will pay higher income taxes under this plan.

• Makes Iowa’s tax system simpler, flatter, and fairer.

• Raises the filing threshold so that the first $6,235 (or $12,450 for married couple) would not be taxed. 

The nonpartisan Legislative Services Agency (LSA) predicts that with this proposal, close to 39 percent of all income tax filers in Iowa would chose the flat tax option and it would reduce the overall tax burden by close to $400
million. With the flat tax option, the greatest number of taxpayers who benefit fall in the $30,000 to $40,000 bracket. For all filers, those who elected this option would save $819 on average.

An amendment to the bill made the bill stronger and set in place a permanent
mechanism to return any overpayment of taxes back to Iowans. Currently, Iowans are paying too much in their taxes. Once the legislature and the governor set budget priorities and reserve funds are full, the taxpayer trust fund collects
anything left over. This bill sends any leftover money back to the taxpayer through a credit on their tax forms. This reduces the tax liability of any Iowan paying income taxes when the state collects more than it needs.

The current state budget surplus is about $800 million. Republicans estimate each individual taxpayer would get a rebate of about $375 next year if the bill becomes law. Future rebates would depend on how big the state budget surplus is — if there a surplus. Representative Tom Sands, a Republican from Wapello, said the proposal highlights a “fundamental” difference between the two political parties. “We do need to ask ourselves a question and it’s a very fundamental question, but it’s a very simple question,” Sands said. “Who does the money belong to: the hard-working Iowans or government?”

I appreciated Rep. Sand’s statement and agreed that any money left over after all our bills are paid and our reserve funds are filled belongs to the hard-working taxpayers of Iowa and we have a duty as a legislative body to return any unused money. Both the amendment and the bill are consistent, fair and simple. Every Iowan is treated the same. Every Iowan is given the same choice between
the current system or the new flat tax system. Every Iowan is given the same credit if the state does not spend everything it collects.

There is a fork in the road – should the legislature take the path of spending limited one-time revenues on recurring expenses growing government or should the legislature send this money back to Iowa taxpayers? I believe any overpayment of tax dollars belongs in the pockets of Iowans, not as a pot of money for the politicians to spend and brag about in the short term knowing full well that the budget cuts will be necessary in the future.

It continues to be an honor to be a voice for the constituents of District 44 and
the citizens of Iowa. Thank you for themany phone calls and emails that continue to come to my desk. We still have much work to do in the coming
weeks and I always look forward to your feedback.

Representative Rob Taylor

House District 44

(515) 240-7019

Rob.Taylor@legis.iowa.gov