Iowa Gov. Kim Reynolds released the text of Senate Study Bill 3116 in response to a proposal she made in January in her Condition of the State Address. The text details proposed changes to the tax code, including a one cent increase in the state sales tax to cover for income tax cuts.
Revenue from the sales tax increase would help fund outdoor recreational programs and water quality improvements, as well as provide a system for funding mental health services, while at the same time limiting the amount counties levy in property taxes to cover the cost of mental health.
Republicans are open to the proposal, but said that the major components would receive significant discussion before there is any chance of it passing. Reynolds said that her team is in the process of communicating with lawmakers and other parties who are interested in the proposal.
The proposed penny sales tax increase could result in a projected increase of $540 million annually. Three eighths of that amount is slated to fund water quality projects and outdoor recreation programs.
Democrats, such as State Sen. Joe Bolkcom, D-Iowa City, said that the tax proposal is “regressive” and will affect those with lower incomes negatively, while helping those who earn more.
Beginning in 2023, Reynolds proposes a 10% cut in the state’s income tax across the board. This would place the top income tax rate at 5.5% for individuals making $75,000 or more, 4.99% for those making $30,000 to $75,000, 4.45% for those who make $6,000 to $30,000, and 4% for those who make less than $6,000.