It is time for members of the Utah House of Representatives and Utah Senate to step up and make sure Utah remains the best state in the nation when it comes to economic growth, jobs and low taxes. If policymakers want to find a model to follow with bold and innovative ideas, they need to look no further than the state of Iowa.
In just the last few years, Iowa has gone from one of the worst tax environments in the United States to now, one of the best. Not long ago, Iowa was home to some of the highest income tax rates in the country. Their individual tax rate at 8.98%, was the highest with only the exceptions of California, New York, New Jersey, Oregon, Minnesota and Hawaii. To make things even worse, their corporate tax rate was 12%, the highest in the country. They might as well have put billboards up near the state border telling businesses and jobs “Go Somewhere Else”.
After the 2022 and 2024 legislative sessions, Iowa’s leaders are providing taxpayers with over $2 billion in income tax relief and have also advanced two constitutional amendments on the ballot this fall that will guarantee further protections for taxpayers for generations to come. In addition, their income tax rate will move to a flat rate – just like Utah – in just a couple of years.
Individual Income Tax Relief
The 2022 legislation set the income tax rate on a downward path over the following several years with these yearly decreases:
2023: 6% top rate
2024: 5.7% top rate
2025: 4.82% top rate
2026: 3.90% tax rate for all taxpayers (flat rate)
Combined with other taxes, this would provide more than $1.7 billion in tax relief for Iowa taxpayers over the four years of implementation.
With continued surpluses, the 2024 session brought another $1 billion in tax relief with an acceleration of the previous tax cuts – bringing Iowa to a flat individual income tax rate of 3.80% in 2025, a year ahead and ten basis points lower than the original plan.
Corporate Income Tax Relief
The 2022 legislation also provided badly needed corporate tax relief, so that Iowa could attract and retain jobs in the coming decades. The innovative thinking of Iowa elected officials will provide a lower corporate income tax rate if the state collects more than $700 million in corporate income taxes in a given year. Every year that revenues exceed that amount, the surplus will be used to lower the rate from the current 9.8% to 5.5% until all corporations pay a top rate of 5.5%. With projections of higher income tax receipts, the rate will likely decrease each year as the Iowa economy continues to grow.
Constitutional Amendments To Protect Taxpayers
To make things even better for Iowa taxpayers, the legislature has also forwarded two constitutional amendments on the ballot this fall that will make it harder for future elected officials to raise taxes. If they are ratified by Iowa voters, they will enshrine significant constitutional protections for taxpayers.
The first proposed amendment would require a two-thirds majority vote of the Legislature to approve an increase in the income tax. Seventeen states have some kind of supermajority requirement for tax increases.
The second proposed amendment would guarantee that Iowa would only have one flat income tax rate. Not only is this single, low tax rate the most fair for taxpayers, but also as Grover Norquist, President of Americans For Tax Reform in Washington, DC has always said, it “eliminates the politicians’ ability to divide taxpayers into groups and mug them one at a time”.
All of these combined tax relief measures add up to substantial tax relief for Iowa taxpayers while still prudently managing the state budget and providing government services. Both can happen at the same time, despite the hollow whining from those that continually bloat themselves in the government feeding trough.
The Utah Taxpayers Association urges Utah lawmakers to take up the baton and lead Utah out on innovative and bold tax relief. Iowa has given an excellent blueprint.
It is time to follow it.