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THIS WEEK: Iowa wants to flatten your tax

Iowa Republicans are poised to make significant changes to the state's income tax system

MOLINE, Ill. — Iowa Governor Kim Reynolds says she wants her state to be more like Illinois.

Well, at least in one way.

Her proposal for a 4% "flat tax" on income was delivered during her 2022 "Condition of the State" address.

"We're still taking too much from Iowa's paychecks," she told lawmakers inside the Capitol where Republicans control the House, the Senate and the Governor's mansion.

Iowa would join Illinois and eight other states with a flat tax on incomes.

They range from a flat 5.25% in North Carolina to 3.07% in Pennsylvania.

Nine other states have no income tax (New Hampshire has no income tax but does have a flat tax on dividends and interest).

"We're bringing over a billion dollars more in revenue than our budget needs and it's time to return that to the taxpayer," said Republican State Sen. Chris Cournoyer of LeClaire on "News 8 THIS WEEK with Jim Mertens".

You can listen to our entire interview with State Sen. Chris Cournoyer on THE CITIES PODCAST.

Iowa Republicans said their actions over the last four years have helped create a $1.2 billion surplus as well as a billion dollars in cash receipts.

Gov. Reynolds says she wants her flat tax plan to be phased-in slowly.

"The cuts will occur gradually over the next four years so that we protect priorities like education and public safety."

Democrats say a flat tax will hurt the middle class and low income earners because the current tax system, a "progressive" tax that imposes heavier income taxes on those who earn more, helps put the tax burden on the people who are better able to afford it.

"We think a lot of Iowans will actually see their taxes go up under this plan," said State Sen. Zach Walls, a Coralville Democrat who is the Senate Minority Leader.

"We think that we need tax relief for middle class and working class Iowans not for millionaires and billionaires."

State Sen. Cournoyer said lawmakers need to be mindful that state budget surpluses are not guaranteed in the future.

"We're always looking down the road and running the numbers to make sure that any cuts that we make today aren't going to hurt us down the road," she said.

"We want to make sure that we're continuing to provide for our priorities and also the services that Iowans expect."

Sen. Cournoyer says there may be competing tax bills in the Iowa House and the Senate.

Some Republicans, like Senate President Jake Chapman, want a more aggressive step.

"Let's keep our eye set on the total elimination of income tax," Sen. Chapman told colleagues in a speech in the state Senate.

"Now is the time for action, now is the time to be bold." 

Gov. Reynolds admitted her incremental approach will reduce the amount of taxpayer money being collected by the state.

But said that's not a bad thing.

"Yes we'll have less to spend every year at the Capitol," she said.

"But we'll see it spent every single day on Main Streets, in grocery stores, and at restaurants all across Iowa." 

You can watch "News 8 THIS WEEK with Jim Mertens" Sunday mornings at 10 on WQAD News 8.