Regressive Taxes and more

Major Regressive Tax Proposal

The Governor proposed a major shift in Iowa’s tax system. The proposed tax changes will replace some property and income taxes with a new penny sales tax. Although she will exempt diapers and feminine products from sales taxes (as Iowa exempts food), this is still a regressive tax. 

Income taxes are progressive, meaning they impose a higher average tax rate on higher-incomes than on lower-incomes. Higher income citizens have more resources to pay.  Having an income tax system that follows this approach equalizes the impact all taxes have on all Iowans. 

Sales taxes are regressive, meaning everyone pays the same amount, regardless of income. For example, a household earning $50,000 pays the same sales tax on a car as a household earning $500,000.   

The Governor’s bill is expected to be public early next week. From the Governor’s state of the state address, it is clear that the proposed tax changes favor high income earners. To create a fair tax system, the lower income households should see a greater reduction in their taxes than higher income households. The Governor’s proposal:

  • Reduces the highest income bracket by nearly 40%. (Currently 9%, reducing to 5.5%)
  • Reduces the lowest income bracket by 25%.
  • Increases sales taxes by 14% 

Many in the lowest bracket will not benefit from the income tax reduction at all as they make so little that they pay no taxes and benefit from the Ronald Reagan initiative, the Earned Income Tax Credit.

The Governor’s legislative liaison told us that this proposal was more than revenue neutral; the Governor’s plan will reduce state revenues by $7 million. 

In short, the governor’s plan 1) is regressive and favors higher income earners; 2) raises taxes on the poor and middle class; and 3) reduces state revenues by $7 million. 

Good for Iowa: This bill contains parts that most agree are good for Iowa. With the passage of a penny sales tax; 3/8th cent is constitutionally protected to go to a fund which will protect Iowa’s natural resources (IWILL). I strongly support investing in Iowa’s environment. However, I believe with a $7 million reduction in revenue, we will put other environmental protection programs in danger. 

The bill claims to fund mental health services. Again, it reduces state revenue and we already struggle to provide adequate mental health services. 

This is a huge bill and it is a moving target. I hope with input from Democrats, we can create a progressive tax system and fund priorities such as natural resources, education, and health care. 

Attacks on Women’s Reproductive Rights moves to the Constitution

Changing the Constitution is a serious endeavor. In the first 3 weeks of session, the Senate State Government Committee passed a constitutional amendment, which will ban abortions in Iowa if it is approved. The same amendment has been filed in the House; there is a subcommittee meeting (Tuesday at noon) on HSB 577. I was appointed to this subcommittee and will oppose this amendment. Subcommittees are open for public comment. 

Quote of the week: “Autonomy and dominion over one’s body go to the very heart of what it means to be free. At stake in this case is the right to shape, for oneself, without unwarranted governmental intrusion, one’s own identity, destiny, and place in the world. Nothing could be more fundamental to the notion of liberty. We therefore hold, under the Iowa Constitution, that implicit in the concept of ordered liberty is the ability to decide whether to continue or terminate a pregnancy.” — Former Chief Justice Cady, Supreme Court Majority decision, Planned Parenthood vs. Reynolds