Governor Kim Reynolds and Iowa Senate and House leadership have announced a tax cut plan has been agreed to between all the parties.

According to a release issued by the governor’s office, the bill includes $398 million in reductions for 2019. If fully implemented as soon as 2023, the plan will reduce the number of individual income brackets to four, with a top rate of 6.5 percent. The top corporate rate will be lowered to 9.8 percent.

The governor’s office says the average Iowan will see between a 20 to 25 percent rate reduction after five years, assuming state revenues remain steady. Revenue triggers were included that would prevent further tax cuts if money coming in falls short of projected goals.

This agreement also eliminates federal deductibility, reducing the number of individual income tax brackets, automatically coupling with most federal tax laws and provides a comprehensive review of tax credits.

The tax includes full repayment of the Cash Reserve Fund this year and does not reduce the property tax backfill in 2019.

The agreement also provides breaks to farmers and small business owners by increasing the Section 179 and Qualified Business Income (QBI) deductions:

Section 179 Deduction
$70,000 in 2018 (individual only)
$100,000 in 2019
$1 million in 2020 and beyond
QBI Deduction

25% in 2019 and 2020
50% in 2021
75% in 2022
100% in 2023 and beyond (if triggered)

“The 2018 legislative session was one of accomplishments aimed at unleashing opportunities for all Iowans,” Gov. Kim Reynolds said in a statement. “This historic state-level tax reform – coupled with tax reform at the federal level – will bring significant relief to working-class Iowans in a fiscally responsible fashion that will allow the state to meet its budget responsibilities in the future. These tax cuts are meaningful to Iowans making tough decisions about what they can and cannot afford. I commend the Iowa House and Senate for sharing in my priority of putting Iowans first.”

Most Democrats have responded in opposition to the bill, citing budget cuts made in the last two fiscal years and a lack of available funding for budget priorities such as college education and health and human services, both of which have seen reductions over the last few sessions.

The Iowa Legislative Session was scheduled to end April 17th, but the Iowa House and Senate have been deliberating about a tax reduction plan and other budget items.