Governor Signs Broad Tax Cut Bill with Controversial Mental Health Funding Update | New
(The Center Square) – The tax cuts and mental health funding realignment program signed by Gov. Kim Reynolds is being described by Republican lawmakers in Iowa as a significant achievement.
Senate File 619 passed on May 18 in an extended legislative session to deal specifically with tax matters, and was signed by the governor on Wednesday.
“Today the Iowa Senate made Iowa more competitive,” Senate Majority Leader Jack Whitver, R-Ankeny said last month. âReducing the top tax rate to 6.5% means families in Iowa will keep more of the money they earn. Lower tax rates make this state more attractive for small businesses and people looking for new accommodation, âhe said.
âThe gradual elimination of inheritance tax puts an end to the unfair practice of taxing the dead. Eliminating the mental health tax finally offers real property tax relief to the people of Iowa. The people of Iowa have asked for tax relief and the Iowa Senate has responded to those calls, âWhitver added.
Senator Dan Dawson, R-Council Bluffs, Chairman of the Ways and Means Committee, concurred with this opinion.
âSenate Republicans promised bold tax reform when the session began in January and this bill was honored,â he said. “This bill includes the elimination of tax triggers, the elimination of inheritance taxes, tax relief for small businesses and tax cuts for Iowa families. Senate File 619 is the bill tax that the people of Iowa deserve and I am proud that it passes the Iowa Senate. “
However Senate Minority Leader Zach Wahls D-Coralville, commenting at the end of the session on his blog, saw this year as a failure.
âWith our Build Back Better plan, the Democrats in Iowa have introduced more than two dozen bills to help the people of Iowa get back on their feetâ¦ Sadly, Governor Reynolds and the Republicans have chosen not to not work with us on these proposals. â Wahls says their ideas would have ensured long-term economic growth.
Democrats and Republicans largely disagree on the pros and cons of the 2021 session; Likewise, the votes on the tax bill closely followed party lines. Senator Pam Jochum, D-Dubuque, supported most of the bill’s provisions, but the transfer of mental health funding to the state broke the deal.
Jochum told The Center Square the result will cut funding to the 14 mental health regions. The mental health provisions shift funding from regional property tax to statewide support over the next two years. Jochum said that a system that has been in place for a long time will not work well at the state level, “It’s best when you give it to the people closest to the situation.”
Jochum says she takes mental health care very seriously and personally. Her intellectually disabled daughter Sarah died two years ago from brain damage after falling down the stairs. Still, she thinks the dollars for mental health might not go down: âI really hope I’m wrong, but at the moment I think it won’t work the way they proposed.
Of course, the dollars saved are of great importance to all parties. The estimated personal tax savings over the next 10 years are $ 1 billion. This works out to about $ 125 million per year. Annual savings per person are projected at $ 40.
Of course, determining what a specific family or business will earn varies widely.
Dr. Ernie Goss is a regional economist who oversees the Mid-America Business Conditions monthly report.
Goss doesn’t minimize the cumulative benefits of $ 1 billion over 10 years, even though $ 40 may seem insignificant. And he told The Center Square that there are so many provisions in the law that it challenges providing adequate insight to consumers and what that will mean to them.
Jochum thinks the bill was just too massive and should have been broken down into smaller pieces. She says she could have voted for several of these pieces.
Kristine Tidgren, director of the Iowa State Center for Agricultural Law and Taxation, wrote on an Iowa state website that the legislation has eight main provisions and 18 additional provisions. In other words, adds Goss, the average person would need a tax accountant rather than an economist to fully explain the impact.
Nonetheless, Goss considers several of the provisions to be positive for economic growth. Shifting mental health costs from local property taxes to the state level is helpful: âProbably a good change and needs to be done. Property taxes can be quite onerous. I owned a house in Iowa.
Goss also says removing federal taxes as a deduction from Iowa taxes was a smart move. This previous wording gave the impression that Iowa had a higher tax burden than other states that had already waived this deduction. The state thus becomes less attractive for internal expansion and foreign investment. Neighboring Missouri and South Dakota, in particular, have lower tax rates than Iowa.
Hawkeye state joins three other states that have reduced income tax rates since the start of the pandemic: Idaho, Oklahoma and Montana. This data comes from the Tax Foundation.
Compare that with New York where the pandemic hardly affected tax revenues. Yet Albany recently increased personal and corporate tax rates. Governor Reynolds has said she will call for further tax cuts during legislative sessions in 2022.