Reynolds won’t reintroduce Invest in Iowa Act in upcoming legislative session

Reynolds’ flagship legislation from last year, which proposed a sales tax increase combined with other tax cuts, will be set aside as the state continues to recover from COVID-19.


Iowa Gov. Kim Reynolds speaks with reporters on a Zoom call Thursday, Jan. 7, 2021. She outlined her priorities for the upcoming legislative session, including her intention to shelve the Invest in Iowa Act, her signature legislation proposed in 2020.

Natalie Dunlap, Politics Reporter

Iowa Gov. Kim Reynolds will not reintroduce the Invest in Iowa act this year, she told reporters on Thursday.

Reynolds formally introduced the act in February 2020 as a means to reduce certain taxes on Iowans and fund conservation and mental health efforts. The act proposed a 1-cent sales tax increase, while bringing down income taxes and other taxes to offset the increase.

Reynolds’ Invest in Iowa act was a major initiative put forth by the governor before COVID-19 changed the Legislature’s priorities last spring.

I said in the Condition of the State last year we need to talk about what we did over the past 10 years,” Reynolds said Thursday. “It really put in place an initiative that prepares us to be in a great spot for the next 10 years, but we’re not through COVID yet and we’re still not 100 percent sure of the impact it will have on our economy moving forward, so at this point I’m going to pause the Invest in Iowa initiative.”

The proposal, before being sidelined by the onset of the COVID-19 pandemic, was estimated to bring $540 million annually to state’s general budget, which would’ve been offset by tax reductions in other areas. That would have split between the Natural Resources and Outdoor Recreation Trust and mental-health services. The mental-health system in Iowa is currently funded mostly from county property taxes.

In Reynolds’ opening remarks regarding the upcoming legislative session, she said Iowa began the 2020 fiscal year strong. Reynolds said the economy was growing, wages were increasing, and more Iowans were working. She also celebrated investments in education, mental health, criminal justice reform and the work done by Future Ready Iowa and Empower Rural Iowa.

“Our budget started in a place of strength … when the pandemic hit, and that really did allow us to absorb a good part of the economic blow. And Iowa didn’t face a lot of massive budget shortfalls that many of the other states did,” she said. “A lot of that I believe was attributed to not only responsible budgeting practices, but the diversity of our economy and the fact that over 80% of our workforce and businesses remained open.”

While the Invest in Iowa initiative is in limbo, Reynolds said, “We’ll work with the Legislature and see if there’s other opportunities for us to make Iowa more competitive and to help Iowans keep more of their money.”

Republican leaders in the Iowa Legislature told reporters Thursday afternoon they’re still open to lowering taxes on Iowans in the upcoming session, though they noted there were no concrete plans as of now. Senate Majority Leader Jack Whitver touted Iowa’s 2018 tax cuts, which were the largest in the state’s history, and he said he’s interested in finding further areas where taxes can be lowered.

“We’re proud of the progress we’ve made on our tax climate, but we also understand that our tax climate is not where it needs to be in the long run,” he said. “And so as long as I’m majority leader and as long as we’re in the majority, we’re going to continue to try to find ways to reduce the tax burden on it.”

House Minority Leader Todd Prichard, a Democrat, said he wants to make sure any tax cuts are granted to working Iowans and vulnerable families. He said he doesn’t want to see the tax burden shift from the state to localities with property taxes.

“We’ve cut taxes, but then that just results in a tax increase for property tax owners or local option sales tax to fund their school and their mental health,” he said. “And so if we’re going to have tax cuts let’s talk tax cuts for working Iowans, not just for those at the top and not just a burden shift.”

Democratic lawmakers told The Daily Iowan in December 2019 that the $289 million budget surplus Iowa saw at the end of 2019 was a result of Republicans neglecting social services.

Business and families were significantly impacted by COVID-19 and the derecho. Reynolds said the state allocated nearly $1.25 billion of the CARES Act funding to families, business, health care, mental health, education and farmers, and that the state will be receiving another $1.25 billion in the next round of CARES funding.

$345 million from the second round of funding is going to K-12 education, $120 million to higher education, and $210 million is being devoted to rental assistance, Reynolds said.

Reynolds noted that President-elect Biden intends to pass more COVID relief for states, and she said she doesn’t think the state should appropriate money from its cash reserves for COVID relief unless necessary.

“I think it would be irresponsible for us to deplete our cash reserves when we’re not sure what the economy completely is going to do this year, and then have no way to replenish them,” Reynolds said. “So let’s work with our federal partners, let’s take advantage of the dollars that are coming into the state, let’s make sure that we’re using those in a judicious and in a meaningful manner, and then start to assess if there are additional gaps that we need to address as a state.”