Republicans in the Iowa Senate Wednesday night approved the largest tax cut package in Iowa history, approving a bill to reduce corporate and individual income taxes by as much as 30 percent.
"Today is a monumental day for Iowa families and Iowa workers," said the bill’s sponsor Sen. Randy Feenstra (R-Hull). “Today, we are taking a bold step in making Iowa’s economy more competitive."
Iowa’s top corporate tax rate of 12 percent, currently the highest in the country, would be reduced to 7 percent under the bill.
The bill would reduce available state revenues by hundreds of millions of dollars starting next year.
Sen. Herman Quirmbach (D-Ames) pressed Feenstra on what would have to be cut out of next year’s budget to pay for it:
“Senator, are you going to answer my question or not?” Quirmbach asked.
“It’s in appropriations right now and we are working on it,” Feenstra answered.
“Tell me, which budgets are you going to cut to pay for your tax cut?” Quirmbach replied. “It’s a simple question.”
According to the non-partisan Legislative Services Agency, if the bill becomes law, revenues would fall by $1.2 billion by 2023 out of a $7.2 billion state budget. Right away next year, there would be $207 million less to appropriate.
"Reducing the state of Iowa’s revenue by $1.2 billion annually will have a catastrophic consequence to
public education, public safety and managed health care," said Sen. Matt McCoy (D-Des Moines).
Feenstra accused Democrats of “fear-mongering.”
“Why?” Feenstra asked. “Because we want to give money back, and they want to take the hardworking dollars of Iowans.”
Democrats warned such a big tax cut would bankrupt the state, and they said higher income Iowans would benefit most.
All 29 GOP senators voted for the bill. Independent Sen. David Johnson and all 20 Democrats opposed it.
The bill’s future in the GOP-controlled House is uncertain. House Republicans are focusing on Gov. Reynolds' less expansive tax cut plan.
“The conversation that we're having today is a positive conversation," Reynolds said before debate on the Senate bill. "I want to make sure that I do it in a responsible way, and I believe the tax plan that I put forward does that."
“This is a bill that’s going nowhere,” McCoy said of the Senate bill.