Today, House Republicans passed House File 478, a bill that leaves more money in Iowans’ pocketbooks and reduces Iowans’ income taxes.
The bill gives Iowans a choice when paying their income taxes, either the current system or a 4.5 percent flat tax with zero deductions or credits. No one will pay higher income taxes under this plan. Additionally, it raises the filing threshold so that the first $6,235 (or $12,450 for married couple) would not be taxed.
“House File 478 not only cuts Iowans’ taxes, it makes our tax system simpler, flatter, and fairer,” said House Majority Leader Linda Upmeyer (R-Clear Lake).
The nonpartisan Legislative Services Agency (LSA) predicts that with the House proposal, close to 492,000 taxpayers will see their taxes reduced. With the flat tax option, the greatest number of taxpayers who benefit fall in the $30,000 to $40,000 income bracket.
The bill also creates a permanent mechanism to return any overpayment of taxes back to Iowans. Currently, Iowans are paying too much in their taxes. Once the legislature and the governor set budget priorities and reserve funds are full, the taxpayer trust fund collects anything leftover. This bill sends any leftover money back to the taxpayer through a credit on their tax forms. This reduces the tax liability of any Iowan paying income taxes when the state collects more than it needs.
“With this bill, we make Iowa’s state income tax system more competitive, since our current 8.98 percent top rate is simply much higher than many other states,” said Rep. Chip Baltimore (R-Boone), floor-manager of the bill. “When the current top tax rate starts with incomes as low as $67,000 per year, too many middle income families are paying far more in state income taxes than they should.”
The bill passed the House on a party-line vote and was sent to the Senate for their consideration.