Iowa’s Governor Prepares to Reveal Plan to Eliminate State Income Taxes

(RADIO IOWA) For over a year, Governor Kim Reynolds has been saying her goal is to eliminate the state income tax by the end of 2026 and two weeks from today Reynolds has indicated she’ll present a tax plan to the legislature.

Iowans for Tax Relief president Chris Hagenow says his group supports lower and flatter taxes for everyone. “We believe that Iowans are overtaxed and that money can be better spent by Iowans than the government, first and foremost,” Hagenow says. “and we think that other forms of taxation are more fair than the income tax.”

Critics say nearly half of state revenue comes from the income tax and Mike Owen of Common Good Iowa says eliminating the state income tax would be a disaster. “The income tax is the only part of our system that really reflects ability to pay,” Owen says. “…Sales taxes and property taxes, these things really do hit lower income people harder than they do higher income people.”

Owen says already approved income tax reductions will reduce revenue to the state of Iowa by 20%. “They’re not phased in yet. People don’t even see the impacts yet because the legislature hasn’t put together the budget for Fiscal Year ’28, for example, when you lose $2 billion from revenues,” Owen says.

Hagenow expects GOP lawmakers to set up a system to gradually eliminate the income tax as there’s growth in other tax revenue. He cites things like eliminating some sales tax exemptions or deductions and getting rid of income tax credits. “I can’t stress enough the point that this is not hoping things work out in the future,” Hagenow says. “…Whatever comes out I know that it’s going to line up.”

Hagenow and Owen made their comments during a recent appearance on Iowa Press on Iowa PBS. The 2024 Iowa legislature convenes Monday, January 8 and Governor Reynolds delivers her annual address to lawmakers on the 9th of January.