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Legislative leaders today unveiled a tax fairness plan that would reward work and provide needed tax cuts to middle-class Iowans.  The proposal would simplify Iowa’s income tax system, cut tax rates for every Iowa taxpayer, and ensure that more than two thirds of Iowans would receive a tax cut or see no increase in the amount of taxes they pay each year.

“This plan helps Iowa’s middle-class families. It is a sharp contrast to the tax cuts approved by the Legislature in previous years which have largely benefited the wealthiest Iowans,” said Senator Joe Bolkcom of Iowa City, Chair of the Senate’s Ways & Means Committee. “We intend to reward work and provide needed tax cuts to middle-class Iowa workers who are bearing the brunt of the national recession.”

Rep. Paul Shomshor of Council Bluffs, Chair of the House’s Ways & Means Committee, said there are many reasons why the Legislature should move this year to approve this tax reform.

“First, it will boost efforts by Iowa communities to attract good-paying jobs to our state. Second, it will make our tax system more simple and fair for Iowans,” Shomshor said.

“In the midst of a deepening national recession, this is the perfect time to drive a stake through the heart of an antiquated, unfair tax system and to provide real tax cuts to middle-class families across the state,” Bolkcom added.

More money in the pockets of middle-class families

Under the proposal, state income tax rates will fall for all Iowans and the amount of state income taxes paid by at least two-thirds of Iowans will be lower or stay the same, according to an analysis by the nonpartisan Legislative Services Agency. This proposal does not increase state revenue. Instead, it is “revenue neutral.”

Attracting good-paying jobs

“This tax reform proposal would strengthen Iowa’s business climate,” Shomshor added. “For years, state and local economic development groups across Iowa have urged us to reduce Iowa’s income tax rate, which is often perceived to be the 4th highest in the nation. Under our proposal, Iowa’s top income tax rate will drop 2 points from 9 percent to under 7 percent.”

Analysis of the middle class tax cut plan by income group (non-partisan legislative services agency)

Middle Class Tax Cut Highlights