Hite Capitol Update – January 20, 2022
This week marked the second week of the session. The pomp and circumstances from the first week are done and we get down to the business of Iowans. We had several committees and subcommittees this week, and I ran my first bill in committee for the session. That bill, House Study Bill 526, which is a common-sense bill that saves Iowan’s some money in probate cases. I’m proud to say that this bill passed unanimously out of committee.
This week we also passed another bill of mine out of the Education Committee, House Study Bill 521. Currently in Iowa, as we see more and more wind energy, we are also seeing more and more Tax Increment Financing involving these wind projects. TIFF allows a county or city to capture all of the property taxes from a certain area, which are then supposed to be used for development and infrastructure within that area. Money that would have flowed to the school for their share of the state cost per pupil is instead rerouted to counties and cities, and the state is required to backfill the schools. This backfill has grown to over $70 million in recent years.
These TIFF districts were originally intended to help cities and counties offset the cost of infrastructure for development or redevelopment areas. These areas are called Urban Revitalization Zones. What we have seen with these wind turbine areas is the money is being taken from schools and other taxing entities not for “urban revitalization,” but instead to be used by counties for other projects in other parts of the counties, and the Iowa tax payers as a whole are paying for it.
My bill simply says that if a city or county wants to create an Urban Revitalization Zone which includes wind turbines they can, but the schools are going to keep their money and therefore the State will not have to backfill these districts. It’s a huge win for Iowa tax payers and will help keep the state budget in check.
Last week, Governor Reynolds laid out her comprehensive tax relief plan for the 2022 legislative session. This week more details and fiscal information are available as House Study Bill 551. Her proposal includes the following:
1. An employee-owner is allowed one lifetime election to exclude from income tax their net capital gains from the sale or exchange of capital stock (ESOPs). This exclusion is phased in over three years, starting tax year 2023.
2. A retired farmer is allowed to exclude income from rental of their property from tax. The farmer must be 55/farmed for at least 10 years. If the farmer choses this exemption, they are not eligible for the capital gains exclusion provided by the next section.
3. A farmer is allowed a single lifetime exclusion of capital gain on the sale of the retired farmer’s land or livestock. This change begins in tax year 2023.
4. The tax brackets and rates that would go into effect in tax year 2023 are stricken and reduced further in tax years 2023, 2024, and 2025.
5. Beginning in tax year 2026, all individual income is taxed at a flat 4.0 percent rate.
6. Corporate tax rates are to be reduced based on a revenue trigger. In a year where corporate tax revenue exceeds $700 million, the excess is used to reduce the corporate rates the following year. This change begins in tax year 2023.
7. When the corporate rates are reduced as laid out in number 6 above, to a point where all rates equal 5.5 percent, the corporate tax rate is codified at a flat 5.5 percent.
8. Currently, Iowa Code provides for an income tax exclusion for the first $6,000 of retirement income. Under the Governor’s proposal, all retirement income would be excluded from tax.
The change begins in tax year 2023.The Governor’s tax proposal has many moving parts, but is actually quite simple. Her plan is to reduce the taxes of all Iowans, impose a fair and flat tax, and keep retirees in the state by excluding retirement income. As they say, the devil is in the details, and I am sure we will continue to look at, study, and maybe even offer some changes. I think the Governor has laid out a bold and ambitious plan that puts Iowans first and makes us competitive on the national scene.
In the upcoming weeks we will continue to work on issues affecting Iowans. We’ll have committees and subcommittees and floor debates. I encourage you to visit us at the Capitol when we’re in session. If we can find a free minute, we can even make the trip to the top of the dome. As always, please email me at dustin.hite@legis.iowa.gov with any questions, comments, or concerns.
