Governor announces $1.83 billion budget surplus, calls for tax cuts
Gov. Kim Reynolds signed a property tax cut into law May 4, 2023. She's calling for more tax cuts after the state recorded a $1.83 billion general fund surplus. (Photo by Robin Opsahl/Iowa Capital Dispatch)
Iowa Gov. Kim Reynolds and Statehouse Republicans said they planned to pursue more tax cuts in the upcoming legislative session, after the governor’s office announced Iowa ended the fiscal year with a $1.83 billion surplus.
In addition to the budget surplus in the general fund, the state closed out the 2023 fiscal year with $902 million in reserve funds, Reynolds announced Wednesday. The state also holds $2.74 billion in the Taxpayer Relief Fund — money which is set aside for future tax reductions.
“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,” Reynolds said in a news release. “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.”
One component of a 2022 tax law signed by Reynolds reduced corporate taxes for the upcoming fiscal year, the governor announced earlier in September. Iowa’s corporate tax rate will fall from 8.4% to 7.1% in 2024, a reduction triggered by the state’s net corporate income tax receipts exceeding $700 million. The corporate tax rate also fell last year, reduced from 9.8% to 8.4% through the same mechanism.
Senate Majority Leader Jack Whitver praised the state’s surplus in a statement Wednesday, saying Iowa is in the “strongest financial position in state history.” He also called for cuts to state income taxes.
“Iowans deserve to keep more of the money they earn and today’s news shows it is time for bigger and bolder income tax cuts,” Whitver said. “As long as I am Majority Leader, the Senate will continue to reduce taxes on Iowans and in the 2024 Legislative Session we will again work with Governor Reynolds and the House to achieve that goal.”
Reynolds told the Libertarian think tank Cato Institute in February her goal was to eliminate Iowa’s individual income tax before 2027.
“My goal is to get to zero individual income tax rate by the end of this second term,” she said. “So we’re really focused on that. We would have probably taken a look at this year, bringing it down just a little bit more, but I wanted to just watch what was happening with the environment, with inflation and recession.”
Democrats criticized Reynolds and Republican lawmakers, who control both the Iowa House and Senate, for their focus on tax cuts. Rep. Timi Brown-Powers, D-Waterloo, said Reynolds is “playing politics” with her budget priorities.
“Too many Iowa families and small businesses got nothing from her tax cut scheme while $300 million of our tax dollars went to the biggest corporations,” Brown-Powers said in a Wednesday statement. “Whether it’s shifting money from public schools to private schools, giving the wealthiest Iowans new tax breaks, or stripping away freedom from Iowans, Reynolds always puts the special interests and politics first.”
Sen. Janet Petersen, D-Des Moines, also criticized Reynolds’ budget strategy.
“While Gov. Reynolds is again slashing corporate taxes and promising more giveaways to come, middle-class families still aren’t getting ahead,” Petersen said.
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