We had a busy and productive week last week at the Capitol, as we accomplished a great deal of bipartisan work on behalf of Iowans. The number of bills eligible for floor debate is steadily increasing and we were able to advance many good pieces of legislation to the Senate for their consideration.
On Wednesday, the House passed legislation that will leave more money in Iowans’ pockets and reduce income taxes for Iowans across the state.
HF 478 gives Iowans a choice when paying their income taxes. On a year-to-year basis, Iowa taxpayers can choose to file their income taxes through the current system with no change, or utilize a 4.5 percent flat tax option with zero deductions or credits. The bill also raises the filing threshold so that the first $6235, or $12,450 for married couples, will not be taxed. Under this proposal, no one will pay higher income taxes, and it is estimated that approximately 490,000 Iowa taxpayers will see a reduction.
This legislation will make Iowa’s tax system simpler, flatter, and fairer.
The nonpartisan Legislative Services Agency (LSA) predicts that HF 478 would reduce Iowans’ overall tax burden by close to $400 million. It is also projected that with the flat tax option, the greatest number of taxpayers who will benefit fall in the $30,000 to $40,000 tax bracket. Those who choose this method will save an estimated $819 on average when filing their income taxes.
There is no doubt this bill will greatly benefit Iowa’s hardworking middle-class. Because Iowa’s current top tax rate starts with incomes as low as $67,000 per year, many middle income families are paying far more in state income taxes than they should.
In addition to saving Iowans more on their income taxes, the bill also establishes a permanent mechanism to return any overpayment of taxes back to the hardworking taxpayers of Iowa.
After the Legislature and Governor have agreed to a final budget that meets the priorities of Iowans, and our reserve funds are full, any further collection of taxpayer dollars is anovercollection by the state. This bill sends the overpayment of taxes to the Taxpayer Trust Fund, where it will be returned to Iowans through a credit on their tax forms. It is essential to ask ourselves a very simple, yet fundamental question, who does the money belong to: hard-working Iowans or the government?
HF 478 has been sent to the Senate, where we are hopeful it will be brought forth for further consideration.
This legislation is consistent, fair, and simple. Under this proposal, every Iowa taxpayer is treated the same. Each taxpayer is given a choice that will enable them to do what makes the most sense for their own household budget. Additionally, once the Legislature and Governor have gone through the state budget and determined what the cost will be to meet the priorities of Iowans, and we find ourselves with more revenue than necessary, we need to return the money to its rightful owners- the hardworking taxpayers of Iowa.
Tags: HF 478, income tax reform, Legislative Services Agency, Linda Upmeyer