Last Wednesday, the House passed House File 478, a bill that leaves more money in Iowans’ pocketbooks and reduces Iowans’ income taxes.
House File 478
Gives Iowans a choice when paying their income taxes, either the current system or a 4.5 percent flat tax with zero deductions or credits. No one will pay higher income taxes under this plan.
Makes Iowa’s tax system simpler, flatter, and fairer.
Raises the filing threshold so that the first $6,235 (or $12,450 for married couple) would not be taxed.
The nonpartisan Legislative Services Agency (LSA) predicts that with the House proposal, close to 492,000 taxpayers will see their taxes reduced. With the flat tax option, the greatest number of taxpayers who benefit fall in the $30,000 to $40,000 income bracket.
The bill also creates a permanent mechanism to return any overpayment of taxes back to Iowans. Currently, Iowans are paying too much in their taxes. Once the legislature and the governor set budget priorities and reserve funds are full, the taxpayer trust fund collects anything leftover. This bill sends any leftover money back to the taxpayer through a credit on their tax forms. This reduces the tax liability of any Iowan paying income taxes when the state collects more than it needs.
Both the amendment and the bill are consistent, fair and simple. Every Iowan is treated the same. Every Iowan is given the same choice between the current system or the new flat tax system. Every Iowan is given the same credit if the state does not spend everything it collects.
To see the full staff analysis of the bill, you can click here
And to read the full bill, you can click here
The bill passed the House on a party-line vote and was sent to the Senate for their consideration.
There is a fork in the road – should the legislature take the path of spending limited one-time revenues on recurring expenses growing government or should the legislature send this money back to Iowa taxpayers? House Republicans believe any overpayment of tax dollars belongs in the pockets of Iowans, not as a pot of money for the politicians to spend and brag about in the short term knowing full well that the budget cuts will be necessary in the future.
Tags: flat tax, HF 478. Legislative Services Agency, income tax reform, Kraig Paulsen, tax cuts