January 17, 2022

Reynolds proposes 4% income tax, unemployment cuts, ‘school choice’

Reynolds proposes 4% income tax, unemployment cuts, 'school choice'


Gov. Kim Reynolds proposed Iowans pay a 4% flat income tax rate and that the state no longer tax retirement income in her Condition of the State address Tuesday. 

Reynolds laid out her 2022 agenda in a speech to the Iowa Legislature that was broadcast in prime time. It includes the tax cuts, the third round of reductions she hopes to sign as governor; cuts to the state’s unemployment system; $1,000 retention bonuses for teachers, law enforcement and corrections officers; and scholarships to allow parents to pay for their students to attend private schools. 

Reynolds, a Republican, is expected to seek reelection to a second full term this year. She framed her policy proposals, from tax cuts to transparency in schools, as a means of getting government out of the way and allowing Iowans to make more choices for themselves. 

“We’re strong because we’ve been guided by the lights of common sense, fairness and freedom,” Reynolds said. “By the knowledge that bold action isn’t always government action. It’s Iowans making their own decisions for their own families and future.” 

Reynolds’ speech included few mentions of the COVID-19 pandemic, which has killed more than 8,000 Iowans. She briefly referred to “the pandemic” when mentioning keeping Iowa’s economy open, teacher pay, the state’s worker shortage and Iowa’s achievements in the last year. 

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Democrats, meanwhile, said Reynolds and her policy agenda are responsible for worsening the state’s worker shortage. 

“Looking at our state from the outside and at everything Iowa Republicans have done, would you want to move here?” Iowa Democratic Party Chair and state Rep. Ross Wilburn said following Reynolds’ speech in remarks streamed live on Facebook. “If we want to make Iowa a place where folks want to live, work and raise a family, we have a lot of work to do. Because we are facing a workforce crisis, and it lays directly at the feet of you, Kim Reynolds.”

Reynolds calls 4% income tax rate ‘flat and fair’

Reynolds’ tax cut proposal would phase Iowa to a 4% flat income tax rate over four years — a rate she called “flat and fair.” 

“Around kitchen tables, in the fields and back offices, Iowans understand that we in this building don’t fund anything. They do,” Reynolds said. “And right now they’re paying too much.”

In 2023, the first year the plan would be in effect, Iowa’s top income tax rate would drop from 6.5% to 6% and would gradually lower until all income taxpayers pay 4% in 2026. 

Reynolds’ office estimates the tax cut will reduce state revenues by about $500 million in 2023 and by nearly $1.6 billion in 2026, the first year it’s fully phased in. Her staff said they believe the state will be able to afford the tax cuts if state revenues continue to grow at a 4% average rate and state spending continues to grow at an average 2% rate, as it has under Republican control. 

An average Iowa family will pay $1,300 less in taxes in 2026, on top of another $1,000 that’s being phased in from a previous tax cut, according to estimates provided by Reynolds’ staff. 

But Senate Minority Leader Zach Wahls, D-Coralville, the tax plan would leave some low-income Iowans worse off.

“It’s going to be a tax increase for a lot of Iowans,” he said. “If you work part time and you’re not currently paying the 4% rate, for a lot of folks it’s actually going to be an increase.”

Reynolds’ plan would also exempt retirement income — such as from a 401K, IRA or pension — from state taxes. That measure is expected to reduce state revenue by about $400 million, according to Reynolds’ staff. Retiring farmers would also be exempted from state taxes on cash rent payments they receive when they retire. 

“You’ve worked hard all your life, saving for retirement and paying your fair share in taxes,” Reynolds said. “It’s time you got a break from the tax collector. You’ve earned it.” 

Republicans in both chambers have said they’re fully behind a push for more tax cuts this session, pointing to what they say is an overcollection of taxpayer dollars that has helped led to a $1.2 billion surplus and another billion dollars in cash reserves. 

Reynolds proposes 4% income tax, unemployment cuts, 'school choice'

Reynolds proposes 4% income tax, unemployment cuts, 'school choice'

Iowa Gov. Kim Reynolds proposes tax cuts in Condition of the State

In her Condition of the State address, Gov. Kim Reynolds announced she’ll propose a new tax cut to the Iowa Legislature.

Iowa PBS, Des Moines Register

“That’s definitely the direction we want to go,” Senate Majority Leader Jack Whitver, R-Ankeny, said of Reynolds’ proposal following her address. “Getting to a flat tax is a huge step, and so (I’m) very pleased with the tax proposal and can’t wait to get to work on it.”

Democrats have said Iowa is taking in more money this year due to the influx of federal relief cash during the coronavirus pandemic, and they fear cuts could hurt state services in the future. But they also have said they’re open to discussions on tax cuts that focus on middle- and lower-class Iowans.  

Reynolds has already signed two rounds of tax cuts as governor, including a 2018 law touted as the largest tax cut in state history and legislation last year that cut income and property taxes and phases out the state’s inheritance tax. 

Reynolds focuses on workforce; proposes cuts in unemployment benefits 

The workforce was a central theme of Reynolds’ speech Monday as she proposed several initiatives she said will attract and keep workers in the state. Those include cuts to unemployment and $1,000 pay bonuses for teachers and law enforcement officers. She’s also proposing changes aimed at easing operations for child care providers and expanding funding.  

Reynolds said Iowa has the ninth highest labor participation rate in the country but needs to take “bold action” to keep from falling behind.  

Reynolds’ proposal would cut unemployment benefits by reducing the length of benefits from 26 weeks to 16 weeks. She also proposed requiring recipients to potentially take lower-paying jobs than they would need to under Iowa’s current system. 

“There are many reasons for the worker shortage, but we need to recognize that, in some cases, it’s because the government has taken away the need or desire to work,” she said. “The safety net has become a hammock.” 

Reynolds said a new re-employment division inside Iowa Workforce Development will have the “sole purpose” of helping Iowans find work.

Democrats have sought to use the state’s workforce shortage against Reynolds, calling it the “Reynolds workforce crisis.” They point to a 1.6% decrease in Iowa’s workforce since Reynolds took office in May 2017, while the national workforce grew by 1.3% over the same period. 

Reynolds proposes 4% income tax, unemployment cuts, 'school choice'

Reynolds proposes 4% income tax, unemployment cuts, 'school choice'

Gov. Kim Reynolds calls for cuts to Iowa’s unemployment benefits

In her Condition of the State, Gov. Kim Reynolds says it’s time to change Iowa’s unemployment benefits.

Iowa PBS, Des Moines Register

“I don’t think that the problem that we have in this pandemic is people not wanting to work. As we saw when the governor cut off the bonus unemployment over the summer, that didn’t solve the workforce crisis,” Wahls said, referring to Reynolds’ decision to end Iowa’s participation early in several federal pandemic unemployment programs.

Reynolds has already announced significant investments in key areas that she says affect Iowa’s ability to attract workers, including affordable housingwater quality, broadband and child care. She’s using federal relief funds to do so, and Democrats have accused her of taking credit for money included in legislation she opposed. Reynolds touted some of those moves in her prepared remarks.  

To reward those in law enforcement and corrections, she announced employees would receive a $1,000 retention bonus. She additionally promised a $1,000 retention bonus to teachers who stayed on the job through the pandemic and will continue teaching next year. 

“Your work is essential, and we want you to know it,” she said. 

But House Minority Leader Jennifer Konfrst, D-Windsor Heights, said Republicans haven’t been doing enough for teachers. 

“I’m not sure that $1,000 bonus is going to really make them feel better or more welcome in the state when they’re already exhausted and weary from two years of pandemic teaching and being demonized at the Capitol,” she said. 

Reynolds calls for more ‘school choice,’ transparency; Democrats urge her to condemn Senate president’s ‘sinister agenda’ comments 

Reynolds introduced a series of proposals Tuesday aimed at increasing parental choice in education. 

Reynolds said she’ll introduce legislation that allows middle- and low-income families and students with an individualized educational plan to receive state funding to move their child into the education system of their choice. 

About 70% of the money the state allots per child, or about $5,300, will “go directly into an account for families to customize their child’s education,” Reynolds said. The remaining 30% will be distributed by the state to smaller school districts. School districts can still receive local property tax levies for those students, her staff said.  

“School choice isn’t a zero-sum game,” she said. “It has the potential to raise the quality of all schools.” 

The proposal comes a year after Reynolds pitched a similar scholarship program, which did not have enough support to pass the House of Representatives. 

House Speaker Pat Grassley, R-New Hartford, said it sounds like Reynolds has taken into account input she received from House Republicans, but he still wants to review the text of the bill.

“We’ll see how it’s received,” he said. “But remember it is a different plan than last year and I think she’s tried to address some concerns that she heard from us.”

Reynolds proposes 4% income tax, unemployment cuts, 'school choice'

Reynolds proposes 4% income tax, unemployment cuts, 'school choice'

Governor Reynolds wants to offer Iowa parents more choice in education

In her Condition of the State address, Iowa Gov. Kim Reynolds proposes legislation that would allow parents more choice in their child’s education.

Iowa PBS, Des Moines Register

Reynolds also spoke about the need to increase transparency for parents who are concerned about the materials available to their students at school, and she accused some school administrators of pushing their worldview onto students. 

She referred to the debates over library books that have roiled school districts across Iowa and the country, taking issue with books that “contain vulgar and sexually explicit material.” 

“These books are so explicit they’d be X-rated if they were movies,” she said. “We live in a free country with free expression. But there’s a difference between shouting vulgarities from a street corner and assigning them as required classroom reading. There’s a difference between late-night cable TV and the school library.” 

Democrats have criticized some of the Republicans’ previous “school choice” efforts and proposals for parental choice as limiting local control of school boards and taking funding away from public education.  

Before her speech, Democrats called for Reynolds to condemn comments that Iowa’s Republican Senate president made on the issue Monday.  

Sen. Jake Chapman, R-Adel, in his opening speech Monday claimed there is a “sinister agenda” to normalize deviant behavior against children. Chapman has attended school board meetings in the Des Moines metro to advocate against certain books in school libraries and has called for legislation that would make it a felony for teachers to distribute what he refers to as “obscene” books. 

Wahls, who had called on Reynolds to “disavow” Chapman’s comments, said Tuesday night he was disappointed that she did not.

“Essentially, we heard Gov. Reynolds tonight endorse Sen. Chapman’s speech from yesterday, which is obviously very disappointing,” he said.

Stephen Gruber-Miller covers the Iowa Statehouse and politics for the Register. He can be reached by email at sgrubermil@registermedia.com or by phone at 515-284-8169. Follow him on Twitter at @sgrubermiller.

Ian Richardson covers the Iowa Statehouse for the Des Moines Register. Reach him at irichardson@registermedia.com, at 515-284-8254, or on Twitter at @DMRIanR.

Brianne Pfannenstiel is the chief politics reporter for the Register. Reach her at bpfann@dmreg.com or 515-284-8244. Follow her on Twitter at @brianneDMR.





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