Iowa Working Families Tax Relief Act is a bold initiative that will enact the largest tax cut in Iowa history. This plan completely rewrites Iowa’s complex tax code. Over the years Iowa’s tax code has become a collection of tax deductions, exemptions, and credits standing in the way of economic growth, job creation and Iowa family priorities. Senate File 2383 sets competitive tax rates that will drive Iowa’s economic growth initiatives, making Iowa known as one of the most tax friendly states in the nation.
Here’s an overview of what our plan does:
- Provides over a $1 billion a year in overall tax relief.
- Reduces, on average, middle-income earners state taxes by over $1,000 personal income tax, putting more money in the pockets of hard-working Iowans.
- Cuts overall individual income tax rates by 30 percent.
- Lowers Iowa’s top individual income tax rate from the fourth highest in the country at 8.98 percent to a more competitive rate of 6.3 percent.
- Simplifies the current maze of tax forms and reduces tax code confusion by allowing for a more “taxpayer friendly” income tax form.
- Couples Iowa tax law automatically to new federal tax code changes.
- Eliminates federal deductibility. Federal deductibility creates confusion and forces our tax rates to be artificially higher.
- Increases the pension exemption for Iowa seniors.
- Maximizes the new federal benefit of a 20% deduction on all qualified business income for Iowa’s job creators. Farmers could potentially be provided a significantly larger Section 199A deduction.
- Drops Iowa’s top corporate tax rate of 12 percent, the highest in the country, to 7 percent. The new top rate will make Iowa more competitive and provide a strong engine to grow Iowa’s economy and create more jobs.
- Equalizes the taxes on institutions providing financial services with the new financial institution tax structure.
- Modernizes Iowa’s sales tax to protect Iowa’s Main Street Business and create fairness between our local businesses and online businesses
- Sunsets most tax credits to reflect Iowa’s new competitive tax rates. The Iowa Working Families Tax Relief Act is Iowa’s best new economic development tool.
- Tasks the Iowa Tax Expenditure Committee with reshaping the future of Iowa’s tax credits.
Iowans will experience lower tax liability (examples from Tax Year 2022):
- A single mother with one child making $40,000 will see a 56% reduction
- A single taxpayer making $30,000 a year will see a 27% reduction
- A married couple with two kids making $80,000 will see a 20% reduction