(The Center Square) – Iowa is ending fiscal year 2023 with a budget surplus of $1.83 billion, and that money should go back to taxpayers, Gov. Kim Reynolds said Wednesday.
“Some see a surplus as government not spending enough, but I view it as an over collection from the hard-working men and women of Iowa,” said Reynolds. “We’ve seen what the powerful combination of growth-oriented policies and fiscal restraint can create, and now it’s time for Iowans to directly receive the benefits. I look forward to cutting taxes again next legislative session and returning this surplus back to where it belongs – the people of Iowa.”
Reynolds previously signed tax reforms in 2022, transforming Iowa’s progressive nine-bracket income tax that topped out at 8.53% to four brackets topping out at 6.5% in 2023. Iowa will further transition to a 3.9% flat tax by 2026.
Last week, the governor announced that the corporate tax rate would drop for the second year in a row from 8.4% to 7.1% due to the 2022 tax reforms.
The formula provides for a rate reduction whenever net corporate income tax receipts exceed $700 million, according to the governor’s office. The plan is to lower the corporate tax rate to a flat 5.5%.
“As a result of the Governor’s great budget management, we are in an extremely strong financial position, making it possible to meet the needs of Iowans while leaving more money in the pockets of Iowa taxpayers,” said Kraig Paulsen, Director of the Department of Management.
Iowa had the 10th highest total tax burden in 2023, according to a WalletHub report. That’s considering the state’s property tax, individual income tax, and total sales and excise tax. Typically, Iowans pay 23.6% more in taxes than the national average, another WalletHub report found.