The average Iowa taxpayer will save $300 from the Republican tax bill. Nearly half of the tax cuts will go to the state’s highest earners.
Iowa lawmakers are preparing to slash income taxes by more than $2 billion over the next six years.
But how much should Iowans expect to save on their next tax bill?
That depends. A single person making $24,000 per year might see a $59 savings. A married person with two kids making far more will save several hundred dollars.
That all averages out to about $300 per person, an analysis from the Department of Revenue shows.
Lawmakers are scheduled to debate the bill later Saturday, likely making it the last thing they do before adjourning their 2018 legislative session.
Here’s a closer look at what else Iowans can expect and who stands to benefit the most under the proposal.
The Iowa Department of Revenue estimates Iowans will save on average $300 a year from the income tax cuts. Here’s a look at the department’s estimated savings for tax year 2021:
According to the Department of Revenue estimates, benefits range widely across income and family status. Here’s a look at example taxpayers and what they might save.
If you’re a:
Democrats have called the Republican tax plan “extraordinarily tilted toward the wealthy” for delivering the most benefit to the state’s top earners. Republican leaders disagreed, arguing that the combination of a standard deduction and earned income tax credits will mean many modest earners will see very low tax or no obligations at all.
The department of revenue analysis shows that the largest tax savings will go to Iowans in the highest income brackets.
Lawmakers have had to make budget cuts during each of the last two years. So how can they afford to cut taxes?
In part, the changes are possible because of tax reform at the federal level.
Reynolds and Republican lawmakers have said the state should not pocket that money, but instead return it to taxpayers through state tax cuts.
And, as part of their tax plan, they’re increasing some sales taxes on digital goods and services.
Republican leaders say they’ve constructed the plan to line up with estimated revenue growth. But in case revenue doesn’t grow as fast as it’s expected to — as has been the case during the last two years — they’ve built in a series of guardrails.
A series of “triggers” are intended to ensure the cuts only take effect if revenue goals are met.
However, Democrats and others remain skeptical the bill would not lead to future spending cuts. They argue the cuts are too aggressive and the increases are overly optimistic.
While the GOP tax plan includes sweeping income tax cuts, it also raises some taxes.
The proposal calls for collecting sales taxes on video streaming services, digital video rentals, ride share services and taxis. Officials argue those moves will modernize the tax code and provide parity between online and brick-and-mortar retailers.
The changes will also offset some of the cost of the income tax cuts.
An Iowa Fiscal Partnership analysis predicts taxpayers in all brackets will see an average increase each year from the changes.
