Other core states must keep pace with Iowa or risk falling behind by standing still.
By Jonathan Williams and Lee Schalk
As he delivered his State of the Union address amid war, historic levels of inflation and rising energy prices, President Biden laid out a list of costly federal “solutions” . In contrast, Iowa Gov. Kim Reynolds, who delivered the official response to the president’s speech, showed how heads of state are now offering meaningful solutions to Americans — not waiting for those operating in the bureaucratic bubble of DC.
Just hours before delivering his response to the President, Governor Reynolds signed into law the largest tax cut in Iowa history. It delivers an estimated $2 billion in tax relief, which is the largest tax reform package and, in our opinion, the most impressive political achievement 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%) to a significantly lower, flat rate of 3.9 %. Corporate income taxes will also be significantly reduced by flattening three tax brackets (with a top rate of 9.8%) into a single rate of 5.5%. In addition, Iowa will no longer tax retirement income. The state is also phasing out its hated death tax, which is particularly damaging to farmers and small business owners. These are all significant growth-promoting changes to Iowa’s current tax structure.
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Jonathan Williams is chief economist and executive vice president of policy at the American Legislative Exchange Council (ALEC).
Lee Schalk is Vice President of Policy at ALEC.