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Iowa moves closer to a constitutional amendment on a flat income tax

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(The Center Square) – Legislation allowing Iowa voters to decide if they want a permanent flat income tax is in the House of Representatives.

Senate Joint Resolution 2004 would put the single rate for income taxes in the constitution if voters approve.

A tax plan passed by the Legislature in 2022 and signed into law by Gov. Kim Reynolds gradually lowers the state’s tax rate before implementing a 3.6% flat tax in 2026. Lawmakers must vote again on the resolution during the 2025 legislative session before the measure could go before voters.

Twelve states have a flat income tax rate, according to the Tax Foundation. Four states — Colorado, Illinois, Michigan and Pennsylvania — include it in their state constitution. Illinois voters rejected an amendment in 2020 that would have scrapped the constitutionally protected flat tax rate for a progressive income tax.

Senate Democrats opposed the bill, saying the impact of the flat tax that takes effect in 2026 is not known.

“I think that we have to be very careful in putting something in our constitution,” Sen. Cindy Winckler, D-Davenport, said in a subcommittee meeting last week. “Tying the hands of the Legislature in regards to taxation is not the way to make decisions.”

Several groups support the resolution, including the Iowa Association of Business and Industry, the Iowa Bankers Association, and Americans For Prosperity. The Sierra Club, the Iowa Federation of Labor AFL-CIO and the Iowa Catholic Conference oppose the bill.

Sen. Jason Schultz, R-Schleswig, who sponsored the resolution, said flat income tax rates are popular.

“They are second only to no-income tax states which has been offered by the opposition that this is a direction we are looking to go in,” Schultz said.

The Senate passed the resolution by a vote of 34 to 15 on Tuesday, sending the resolution to the House for consideration.

“If we give them (voters) the opportunity, we will be able to have this, going forward, until the corn no longer grows, I would say in a poetic manner,” Schultz said.

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