Week One Capitol Report

January 13, 2022

The first week of the session was filled with opening speeches from both minority and majority leaders in the House and Senate, the Speaker of the House, and the President of the Senate. On Tuesday, January 11th, Governor Reynolds gave her Condition of the State address. This week, each of the speeches highlighted the member's priorities for the upcoming session.  

Governor Reynolds proposed several legislative initiatives and executive actions for the 2022 session, including significant tax reform, addressing the workforce shortage, reforming the state's unemployment system, school choice, and access to childcare.

Tax Reform. Governor's tax proposal would remove the state's individual income tax brackets, creating a flat 4% income tax rate. Additionally, the legislation eliminates the taxation of retirement income. Governor Reynolds referred to Iowa's recovering economy and $1.2 billion budget surplus as signs that the 2018 tax reform bill worked and there was more work to do.

"Around kitchen tables, in the fields and back offices, Iowans understand that we in this building don't fund anything. They do," Reynolds said. "And right now, they're paying too much."

The legislation would phase out Iowa's individual income tax brackets over four years by gradually lowering Iowa's top income tax rate from 6.5% to 4% by 2026. While the Governor's office expects the tax cut to reduce state revenues by nearly $1.6 billion in 2026, they believe the state will be able to afford the cuts if the state revenues continue to grow at an average 4% rate as it has under the states Republican trifecta. 

Additionally, the Governor's tax proposal utilizes the state's budget surplus to lower the corporate income tax rate to 5.5% gradually. For each fiscal year in which net corporate income tax receipts exceed $700 million, the surplus will be used to lower the current top rate until a uniform 5.5% rate is achieved. Once the state reaches 5.5%, the legislation caps the corporate income tax rate.

In 2018, Iowa had the sixth-highest tax rate in the nation; if the Governor's tax proposal passes, Iowa's rate will become the fifth-lowest among states with an income tax. 

Workforce. Iowa's workforce shortage continues to be an ongoing concern for employers. Governor Reynolds proposed many legislative actions to attract and retain workers. Those proposals included reforming the unemployment system, addressing licensure requirements that delay employment and expanding work-based learning programs. 

Childcare. Governor Reynolds announced several Executive Orders to address childcare affordability and accessibility. Some of which include awarding childcare workers with a $1,000 recruitment and retention bonus, expanding the T.E.A.C.H and Child Care WAGE$ programs, and investing $300 million in federal funds to aid in keeping existing childcare centers open. 

In the Senate, Senate President Jake Chapman opened the legislative session encouraging the legislature to consider legislation eliminating Iowa's individual income tax, addressing the state's workforce shortage, and addressing materials in schools that some parents may find inappropriate. 

Senate Majority Leader Jack Whitver focused most of his comments on lowering income taxes and attracting workers. Additionally, Senator Whitver addressed the need for more childcare centers, reducing licensing requirements, and reforming welfare programs. 

Senate Minority Leader Zach Wahls encouraged members of the legislature to focus on legislation that helps attract and retain workers, encouraged funding education and affordable housing. Senator Wahls also called for responsible tax reform policies and legislation to address teacher shortages in the state. 

In the House, Speaker Pat Grassley also reiterated the need for tax reform and said the House majority plans to tackle the ongoing workforce shortage by furthering the work done in 2021 to improve childcare access. Representative Grassley also encouraged members to continue to push back on President Biden's COVID-19 mitigation policies, including vaccine mandates for workers. 

House Majority Leader Matt Windschitl encouraged bi-partisan support for the priorities outlined by Speaker Grassley and Minority Leader Konfrst and urged the legislature to return the surplus in the General Fund to the taxpayers to invest in the state. Representative Windschitl highlighted the need to protect Iowan's freedom.

House Minority Leader Jennifer Konfrst gave her first opening speech as minority leader, calling on members to push back against misinformation related to the pandemic. Representative Konfrst also encouraged the House to consider bi-partisan solutions to supporting public schools, affordable childcare, expanding housing options, and workforce attraction. 

Next week, both the Senate and House will begin holding regular subcommittee and committee meetings on proposed legislation.