"This is the way." Much like the simple mantra of the Mandalorian in the Star Wars universe, the Senate has released a new bill that very simply accomplishes two much-needed pieces of tax policy.
Cut the Rates: The 2018 tax reform law was a good start to lowering both individual and corporate income tax rates in Iowa. But the biggest cut from that bill has yet to be implemented, as it is subject to certain revenue targets, otherwise known as triggers.
In 2023, the top personal income tax rate is scheduled to be reduced from just over 8.5 percent down to 6.5 percent if our state can reach two stringent triggers. The first trigger requires Iowa revenues to surpass $8.3 billion; the second trigger requires revenue growth of at least four percent during that fiscal year.
The use of revenue triggers in state tax policy is a sound principle but creating a high threshold can unnecessarily delay tax rate reductions. The time is now for legislators to finally deliver those tax cuts promised to Iowans in 2018. Senate Study Bill 1250 would guarantee those lower rates go into effect on January 1, 2023.
Bury the Death Tax: Iowa is one of only six states that still tax certain heirs when they inherit property. Too many Iowans end up having to sell off part of the family farm or business when they receive a big tax bill along with their inheritance.
While spouses and direct descendants like children and grandchildren are exempt from this tax, nieces and nephews, cousins, and business partners all get stuck with a bill as high as 15 percent. These farms and businesses have paid income taxes to the state and property taxes to their local governments for years. There is no reason for Iowa to make another grab for cash once someone passes away.
Our neighbors in places like South Dakota, Missouri, and Wisconsin have no inheritance tax. Even a tax-happy state like California has figured out how to make do without an inheritance tax. Senate File 576 would reduce Iowa’s inheritance tax rates for three years in a row before completely eliminating the tax on January 1, 2024.
This bill is the way. Click the button below to send a message to your legislators and tell them to cut the rates and bury the death tax in one single swoop.