Iowa Legislature Finally Comes to Agreement on Major Tax Plan in Overtime

DES MOINES, Iowa - Iowans are now much closer to knowing how their taxes will change with a major agreement in the state legislature that's been working overtime.

The Republican majority in the Senate has passed a plan to reduce property taxes and completely end the state inheritance tax.

It also reduces the top income tax rate that most Iowans pay from 8.53 to 6.5 percent by 2023.

And in a breakthrough, House Republicans have announced they've reached agreement with the Senate and Governor Kim Reynolds after holding out on the plan.

The House released a statement which highlights much of what the Senate passed Monday night:

  • Removal of triggers from the 2018 tax reform bill which ensures income tax cuts for all Iowans go into effect Jan. 1, 2023
  • Increase eligibility for the Child Care Tax Credits from families making $45k to $90k
  • Exempt COVID-19 grant money and Paycheck Protection Plan loans from state income tax
  • Phase out the state inheritance tax over five years
  • Require payment parity for mental health services provided via telehealth and in-person
  • Increase workforce housing tax credits to $40 million for Fiscal Year 2022 and $35 million for the following years
  • Phase out the mental health levy over two years, with guardrails to control for quality and equality of services as well as future costs to the state.

Notably, House Republicans have finally agreed to change funding for mental health from property taxes paid by homeowners to the state. The change will reduce property taxes statewide by $100 million.

The apparent breakthrough on taxes may be signaling that the legislature could be ending its legislative session this week, with just a few lingering bills to consider.

Lawmakers are currently in their third week into overtime after the designated date to adjourn passed on April 30th.

Democrats, who are the minority in both chambers of the legislature, were not included in the negotiations over tax policy changes. Two Democrats in the Senate voted in favor of the bill that passed Monday night.


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