Week Three Capitol Report

January 28, 2022

Tax reform continues to be the primary focus for both chambers of the legislature. Following the governor’s tax proposal released last week, the House and Senate introduced their proposals this week. 

House Study Bill 626 was introduced by Representative Hein, chair of the House Ways and Means Committee, on January 27th. The bill is similar to the governor’s proposal but removes the section reforming the corporate income tax rate.

Speaker Pat Grassley noted in his newsletter this week, “Our plan does not include a tax cut for corporations, keeping the focus on individual Iowans who need relief most right now.” 

Senator Dawson, chair of the Senate Ways and Means Committee, shared at the first committee meeting of the year that the Senate Ways and Means Committee would not be taking up any additional legislation until the tax proposal was passed out of committee. On January 27th, Senate Study Bill 3074 was introduced. The Senate proposal differs from the governor’s and House proposals by lowering the individual income tax rate to 3.6% with a plan to eliminate Iowa’s income tax by creating an individual income tax fund to adjust down the rate each year starting in 2029. The plan addresses the corporate income tax rate by decreasing the rate to 7.8% through adjusting various tax credits and exemptions. 

Senate Majority Leader Jack Whitver commented, “We’ve had a Taxpayer Relief fund in place for about 10 years now and it collects money, but there’s no mechanism to reduce taxes so we have to come back and implement tax bills, what we would do with that Taxpayer Relief Fund is, as that accumulates money, we automatically ratchet down the rate as we march down towards a zero tax rate in Iowa.”

All three plans include eliminating retirement income taxes and providing additional exemptions for retired farmers. 

In addition to tax reform, addressing the workforce shortage was discussed in all opening speeches. This week, the House passed several childcare reform bills out of subcommittee and committee, including increasing the child-to-employee ratio. The governor is expected to file two bills in the coming week addressing her workforce initiatives, one of which will likely focus on tort reform and the other on unemployment benefits. 

Next week, committee work will likely pick up in addition to more subcommittees as members prepare for the first funnel deadline on February 18th.