ALEC Op-Ed in National Review – Iowa: A Better State of Taxation
Other heartland states need to keep up with Iowa or risk falling behind by standing still.
By Jonathan Williams and Lee Schalk
As he delivered his State of the Union address against a backdrop of war, historic levels of inflation, and rising energy prices, President Biden outlined a slate of costly federal “solutions.” By contrast, Iowa governor Kim Reynolds, who delivered the official response to the president’s speech, showcased how state leaders are delivering meaningful solutions to Americans right now — without waiting on those operating within the bureaucratic D.C. bubble.
Just hours before delivering her response to the president, Governor Reynolds signed into law the largest tax cut in Iowa history. It provides an estimated $2 billion in tax relief, which is the largest tax-reform package, and in our opinion, the most impressive policy accomplishment of any state so far in 2022.
Highlights of Iowa’s tax-reform plan include collapsing nine personal income-tax brackets (with a current top rate of 8.53 percent) into a substantially lower and flat rate of 3.9 percent. Taxes on business income will also be lowered dramatically by flattening three tax brackets (with a top rate of 9.8 percent) into a single 5.5 percent rate. Additionally, Iowa will no longer tax retirement income. The state is also in the process of phasing out its hated death tax, which is especially damaging to farmers and small-business owners. These are all significant pro-growth changes to the current tax structure in Iowa.
Jonathan Williams is the Chief Economist and Executive Vice President of Policy at the American Legislative Exchange Council (ALEC).
Lee Schalk is Vice President of Policy at ALEC.