Iowa Governor Kim Reynolds introduces plan for 4% flat rate income tax

DES MOINES, Iowa (KCRG) - Governor Kim Reynolds laid out her legislative priorities for the 2022 session during the annual “Condition of the State” address Tuesday evening.

Reynolds introduced a bill that would eliminate tax brackets and set a flat, 4% rate for individual income tax. It would take effect in steps over the next four years.

“The cuts will occur gradually over the next four years so that we protect priorities like education and public safety. But in the first year alone, taxpayers will save almost $500 million,” says Reynolds.

The proposal also removes taxation on retirement income. Starting in tax year 2023, Iowans 55 and older would not have to pay state tax on retirement income from individual retirement account distributions, taxable pensions and annuities. Reynolds says it also favors farmers, eliminating tax on cash-rent payments that come when people retire from farming.

Reynolds called the plan “flat and fair.”

House Minority leader Representative Jennifer Konfrst disagreed, in her rebuttal following the governor’s address. “Flat taxes are notoriously beneficial to wealthy Americans, and that would be true in Iowa as well. I think it’s great that Iowans in the middle would get a 1300 reduction on their taxes, but we didn’t hear what would happen to folks at the top,” says Konfrst.

This comes as Iowa lawmakers enter the 2022 session with around $2 billion dollars in the bank. A $1.24 billion surplus, left from the last fiscal year, was heavily discussed by Republican House leaders during open remarks for the legislative session on Monday. Speaker of the House Pat Grassley, a Republican from Butler County, emphasized a priority of returning those funds to taxpayers.

Reynolds addressed the nationwide disparity between job openings and job seekers in her speech, touching on several methods of tackling the ongoing worker shortage.

One approach looks at a factor behind the shortage: affordable childcare. Governor Reynolds announced plans to expand the Child Care Challenge program to provide another 5,000 childcare openings across the state. She said more grants are already being approved, saying “In Dubuque, Aspire Home Daycare Network will remodel and equip homes that will help stay-at-home moms start their own daycare.”

Also addressing workforce concerns, Reynolds announced the launch of the Teacher Registered Apprenticeship pilot program, calling it the first of its kind in the U.S. The goal is to expand work-based learning opportunities for educators.

“High school apprentices start classroom instruction in their junior year and, within a year of graduation, they can earn a paraeducator credential and associates degree,” says Reynolds. “And for paraeducators, their day jobs will count toward student teaching requirements, greatly reducing the cost and time required to become a teacher.”

Reynolds criticized federal programs like unemployment payments and stimulus checks as contributing factors to the worker shortage. She says she plans to introduce a bill that lowers the term for unemployment benefits from 26 weeks to 16 weeks. “We’ll also increase our efforts to match unemployed Iowans with new opportunities,” says Reynolds. “To that end, I’m announcing the creation of a separate re-employment division within the State, whose sole focus will be helping Iowans get back to work.”

Governor Reynolds also announced retention bonuses for some government workers. Reynolds says federal ESSER funds will be used to give $1,000 for teachers who worked through the pandemic and will continue teaching next school year, as well as using federal ARPA funds to give $1,000 to certified peace officers and corrections officers.

Deidre DeJear, the leading Democrat running for governor, responded on Tuesday to Governor Kim Reynold’s “Condition of the State” address. You can read the full response here.

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