DES MOINES, Iowa — Iowa Gov. Kim Reynolds announced during her Condition of the State address that she wants to eliminate state taxes on retirement income.
Republicans in the Iowa House of Representatives are moving quickly on the issue, with 56 GOP state representatives sponsoring House File 2026 last Thursday.
“We have a billion dollars in surplus, so with that surplus we can afford to sustainably and in a commonsense way give tax relief for Iowans and in this case older Iowans who are on retirement incomes,” said State Rep. Mike Bousselot (R) from Ankeny.
Bousselot said that since almost all Republican state representatives are backing this bill and Gov. Reynolds wants to pass this issue, it could see action in the chambers soon.
“If you have a majority of Republicans in the House that are supportive of it and the governor is supportive of it, typically that means it has got a pretty good prognosis for success,” said Bousselot.
Democratic legislative leaders worry that the governor’s plan to eliminate the tax on retirement income and implement a flat rate on income taxes would increase other rates.
“Republicans like to talk about lowering income tax rates, but then we see property tax go up,” said State Sen. Zach Wahls (D) from Coralville. “But even if someone winds up paying significantly less in income tax, there is a very real chance they are going to wind up paying all that back and maybe then some on the property tax side.”
Along with eliminating the retirement income tax, the governor wants to get rid of tax brackets and implement a 4% flat income tax rate phased in over four years. At 4%, Iowa’s rate would be fifth lowest among all states that charge income tax.