Iowa Gov. Kim Reynolds' tax bill advances, but GOP lawmakers keeping options open for cuts

Republican lawmakers began advancing Gov. Kim Reynolds' plan to further reduce Iowa income tax rates Monday, but the Senate tax-writing chair said he was exploring a range of options in the coming weeks as lawmakers decide how to approach cuts.

Reynolds, seeking to build on three prior cuts under her administration, has proposed accelerating a series of gradual reductions to bring Iowa's rate down to a flat tax of 3.65% in 2024. Her tax package would also cut unemployment tax rates for businesses and change how child-care facilities would be taxed.

The bill incorporating all of those changes was advanced Monday by a Senate subcommittee. But Sen. Dan Dawson, R-Council Bluffs, said he wanted to see details and get further input as the session continues.

"I think we have some pretty large plans out there," Dawson said. "And there's plans that ultimately want to return money back to the taxpayer but have very different ways of doing it."

"Right now, these are all just pieces of paper people are talking about," Dawson told reporters. "I think it's important to kind of get the fiscal notes and give Iowans an opportunity to weigh in and say, 'what is the vision for these monies out there?'"

Reynolds and Republicans aiming to further cut taxes argue that Iowa's current budget surplus warrants returning money to taxpayers. Democrats warn that cuts would overwhelmingly benefit wealthy Iowans, while giving the state less financial wiggle room if the U.S. economy takes a downturn.

Dawson, alongside the House tax-writing chair, has introduced his own tax plan aimed at eventually eliminating Iowa's individual income tax entirely. He called the bill a "starting point" for coming years when he introduced the plan, Senate Study Bill 3141, on Feb. 1.

On Monday, he also introduced two new bills splitting up the parts of Reynolds' plan that would drop businesses' top tax rate for unemployment taxes to 5.4% (Senate Study Bill 3182), and taxing child care facilities as residential properties, lowering their property tax burden (Senate Study Bill 3181).

What Iowa business groups said about Gov. Kim Reynolds' tax cut plan

A range of business groups told lawmakers Monday that they were encouraged by efforts to further reduce taxes.

"This is what helps our small businesses most," said Matt Everson with Iowa's chapter of National Federation of Independent Business. "It's letting them keep their own money and letting them invest how they see fit."

A couple of lobbyists voiced caution about further cuts. Peter Hird with Iowa Federation of Labor, AFL-CIO warned that the proposed changes could hurt the state financially if the economy turned gloomy.

"Our concern is that this fund does start to head downwards in the next couple of years while times are good, we won't be solvent for when times are bad," Hird said.

Several groups spoke in favor of the plan to change child care facilities' tax designations, citing a need for additional care options across the state.

Lead Senate Democrat: Tax plans 'clearly benefit' wealthy

Senate Minority Leader Pam Jochum, D-Dubuque, said the Republican-led plans wouldn't bring relief to Iowans "that most need a tax change."

"The tax bills that we have seen so far clearly benefit the wealthiest of Iowans," Jochum said,

She argued that Iowa needed to invest the budget surplus into "quality of life issues" to attract new workers and retain existing ones.

And though Democrats in both chambers have prioritized expanding access to affordable child care, Jochum cautioned that changing their tax designation may not be the best avenue to do so, instead suggesting that legislators address wages for child care workers.

"Many of them are still earning maybe $10 an hour, and they're having a harder time filling the ranks of who's providing the care for our children than they are for the location itself," Jochum said.

Galen Bacharier covers politics for the Register. Reach him at gbacharier@registermedia.com or (573) 219-7440, and follow him on Twitter @galenbacharier.

This article originally appeared on Des Moines Register: Iowa legislature: GOP lawmakers weigh more tax cuts, governor's bill