DES MOINES, Iowa – Governor Kim Reynolds signed SF619 into effect on Tuesday. The law cuts taxes and invests heavily in mental health as well as basic priorities like childcare and housing. The legislation was a compromise that Reynolds negotiated with Iowa House and the Iowa Senate to complete the 2021 legislature.
“In Iowa, we’re cutting taxes and helping Iowers keep more of their hard-earned money. This legislation not only reduces income and wealth taxes, it also completely eliminates the state’s inheritance tax, ”she said in a released statement. “With this legislation, we are also providing steady and reliable funding for our state’s mental health system, while at the same time making significant investments in housing, labor and childcare.”
The highlights of the bill include:
- Removal of triggers Tax reform bill 2018 ensures the income tax cuts for all Iowans come into effect on January 1, 2023. With the elimination of the trigger, the top tax rate drops from 8.53 percent to 6.5 percent. It also reduces the number of tax brackets from nine to four and eliminates federal income tax deductibility. Taxpayers are expected to save over $ 350 million.
- Increases childcare tax credit entitlement for families earning $ 45,000 to $ 90,000
- Exempts COVID-19 grant funds and Paycheck Protection Plan loans from state income tax, which is in line with federal law. This exempts all taxpayers from all taxes on forgivable PPP funds in 2019. It will return over $ 5 million to small businesses in 2019.
- It will phase out state inheritance tax over a five-year period, which will save taxpayers nearly $ 100 million once fully implemented.
- Requires payment parity for mental health services delivered through telemedicine and in person
- It combines Iowa tax law with federal bonus write-offs for qualifying equipment and other investments purchased on or after January 1, 2021. It will save taxpayers nearly $ 75 million over five years.
- Increases employee residential tax credits to $ 40 million for fiscal 2022 and $ 35 million for subsequent years
- Pulls off mental health levy over two years, saving property taxpayers over $ 100 million.
“Today’s legislation ushers in a new era of growth and opportunity in Iowa,” added Reynolds. “But we’re not done yet. Next year, I’ll be proposing additional income tax cuts to keep Iowa the most attractive place in America to start a business, raise a family, and begin a career. “
Iowa Senate Majority Leader Jack Whitver, R-Ankeny, who was present at the signing, released a statement responding to the bill being signed.
“Governor Reynolds’ signature on SF 619 marks the culmination of years of work by the Republicans in the Senate as we continue to deliver on our promise to Iowan to reduce their tax burden. Iowans pay some of the highest income and wealth taxes in the country and that burden is reduced with SF619. That bill is a $ 1 billion tax cut over the next 8 years. Iowans will know for sure that the next round of income tax cuts will be decided. Mental health property tax will be abolished over the next two years and more money will be poured into the mental health system. Small businesses are encouraged to invest and create more opportunities for Iowans by taking advantage of the Bonus Depreciation Tax Withholding. Ultimately, this law will abolish inheritance tax so Iovans will not be taxed again after a lifetime tax payment, ”he said. “I applaud the governor’s leadership in working out this compromise and partnering with Senate Republicans to provide significant tax breaks for working Iowans.”
The National Federation of Independent Businesses (NFIB) was also present when the bill was signed.
“This important bill is a huge win for small business owners, many who have been devastated by the COVID-19 pandemic,” said Matt Everson, NFIB state director of Iowa, in a released statement. “This legislation will allow our small business owners to invest in their business, give raises and hire new employees. In short, it ensures that Iowa’s economy can continue to grow. Today is a good day for all Iowans. “
State Rep. Ross Wilburn, D-Ames, leader of the Democratic Party of Iowa, criticized the bill for not providing adequate mental health resources.
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“Iowans should know @IAGovernor is not really providing adequate funding for mental health care with this new legislation, ”he tweeted.
“Our health system in Iowa is in crisis and struggling to recover from the pandemic. We should focus on investing more money in mental health care to provide Iowan’s critical support that many still don’t have access to, ”added Wilburn. “This new legislation is also forcing county and city governments to make tough funding decisions. It removes critical funding pledged to cities, counties, and schools, and takes away more than $ 150 million from those communities each year. “