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DES MOINES, Iowa  –Governor Kim Reynolds released her tax reform proposal Tuesday via an emailed press release outlining tax cuts for the middle class. According to the proposal:

  1. A typical single mother with one child making $30,000 will see a 28 percent tax cut next year. By 2023, she’ll see a 54 percent cut.
  2. A typical family of four making $55,000 will see a 10 percent tax cut next year. By 2023, they’ll see a 23 percent cut.
  3. A typical family of four making $70,000 will see an 8.7 percent tax cut next year. By 2023, they’ll see a 20 percent cut.

Reaction was fairly measured at the State House; both republicans and democrats know this tax plan isn’t set in stone, but certainly have their opinions about how this proposal acts as a starting point.

Republican Senator Charles Schneider says this tax proposal gets the ball rolling on an issue which needs to be addressed

“There was an editorial in the Wall Street Journal in December that shows we have the fifth highest tax rate in the country for individuals, and we’re the highest or second highest for corporations; so, in order to be competitive, we do need to lower our rates and I’m glad that the governor is leading on this issue and bringing it forward.

Senator Pam Jochum, a Democrat from Dubuque, agrees that tax reform needs to happen in Iowa, but says Governor Reynolds’ proposal leaves out a key piece.

“What is missing from the governor’s tax plan is absolutely no scrutiny or examination of the corporate tax credits which is the fastest growing part of our state budget right now. It’s going to be around 450 million dollars alone this year.

Jochum says without addressing the tax credits, the proposed cuts to middle class taxes would mean more cuts to state program budgets already being slashed.

“Any tax proposal needs to take into consideration where we’re at in our own budget right now. To do further cuts to education to public safety and other vital services in our state is not a good idea” she said.

Senator Schneider says, however, this tax proposal is not a finished product.

“The governor’s plan deals mostly…well deals entirely with individual rates, I believe. We senate Republicans will be unveiling our own plan next week and I expect to see something in there about corporate rates as well.

With the plan advocating for a more aggressive pursuit of online sales tax, Senator Schneider believes that could be a way to increase revenue to the state, though how much of a revenue boost that would provide is yet to be determined.

Both Democrats and Republicans agree on one point in tax reform, which is eliminating federal deductibility, which allows Iowans to deduct their federal income taxes from their state taxable income.  However, studies show this has little effect on lower and middle class earners but ends up costing the state a great deal in collected revenue.