Dec 9, 2021 - Politics

Iowa Senate Republicans push to eliminate the state's income tax

Illustration of hand holding offering a bag of money to another hand, which is refusing the offer.
Illustration: Rae Cook/Axios

Eliminating the state's income tax is a priority for Iowa Senate Republicans this upcoming legislative session.

Driving the news: Getting rid of income tax will draw more people to Iowa and help alleviate the state's workforce shortage, said Sen. Brad Zaun, R-Urbandale, during yesterday's legislative breakfast held by the Greater Des Moines Partnership.

  • "I think it would be a huge step for the state of Iowa," Zaun said.

State of play: With the state's surplus nearing $2 billion, Senate Republicans say they want to push for major tax reform, including a process that would eventually end the income tax.

  • Some House Republicans are more cautious about major reforms, noting the surplus should be returned to taxpayers, while being mindful of the state’s budget, The Gazette reports.

Yes, but: The state's sales tax would have to increase to make up for the elimination of the income tax, Iowa State economist Peter Orazem said in an episode of Iowa Press.

The other side: Eliminating income tax and subsequently raising sales tax would disproportionately hurt less affluent Iowans, said House Minority Leader Jennifer Konfrst.

  • Because lower-income households spend a larger share of their budgets on goods, some tax economists believe raising the sales tax burdens them more.
  • "That's not acceptable," Konfrst said.

What's ahead: The GOP-controlled Legislature's next session starts Jan. 10, 2022.

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