Reynolds proposes 4 percent flat tax, workforce package in Condition of the State

The state would join 10 other states with one tax rate regardless of income if Reynolds’ proposal passes.


Grace Smith

Iowa Governor Kim Reynolds delivers the Condition of the State Address at the Iowa State Capitol in Des Moines, Iowa, on Tuesday, Jan. 11, 2022. During the State Address, Reynolds spoke about childcare, Iowa teachers, material taught in schools, unemployment, tax cuts, and more.

Natalie Dunlap, Lauren White, and Rylee Wilson

DES MOINES — Iowa Gov. Kim Reynolds proposed a flat income tax rate of 4 percent along with other tax reforms and workforce-based policies during her Condition of the State address on Tuesday.

“My focus tonight is about work and workers,” Reynolds said. “About what puts food on the table and a roof over our head. About what gives us meaning and purpose.”

“Flat and fair” taxes 

Reynolds said part of her soon to be introduced tax bill is eliminating Iowa’s progressive tax system with nine brackets and sets one tax rate of 4 percent, which Reynolds said is “flat and fair.” She said that the cuts will take place gradually over the next four years to result in the average Iowa family paying at least $1300 less in annual state income taxes by 2026. 

“That’s money that can be reinvested into our economy and used to promote the prosperity of every Iowan,” Reynolds said. 

Reynolds pointed to the $1.24 billion surplus Iowa ended its last fiscal year with, saying the state is overcollecting in taxes from Iowans. 

In an interview with The Daily Iowan after Reynolds’ address, Senate Minority Leader Zach Wahls, D-Coralville, said the 4 percent flat tax rate will shift the tax burden towards the middle class. 

“Democrats will not support a tax cut for millionaires and billionaires,” Wahls said. “It’s not the right way to balance our state budget and to fund the programs that help keep our state running.” 

House Minority Leader Jennifer Konfrst, D-Windsor Heights, said the flat tax rate does more to benefit wealthy people than the middle class.  

“I think it’s great that the middle class will get a $1,300 on average tax cut,” Konfrst said. “I’d like to see what that looks like for millionaires in the state of Iowa, and do they truly need another tax cut?”

Senate Majority Leader Jack Whitver, R-Ankeny, said as long as the Republican Party is in the majority, lawmakers will continue to work on tax reductions. He said that this will be an ideal year to work on individual income tax. 

“It really was a bold agenda that I can’t wait to get to work on and on election year, some people like to play it safe, but that’s not who [Reynolds] is,” Whitver said. “She’s bold, and she’s ambitious.”

Another aspect of the bill, Reynolds said, would be eliminating a taxation on retirement income and eliminating the tax for employees who received stock in their company. She said this will incentivize employers to share stock with their employees. 

Rep. Bobby Kaufmann, R-Wilton, said Reynolds focused her speech on getting Iowans back to work and rewarding hard work. 

“Iowans spend their money a heck of a lot better than the government does,” Kaufmann said. “This is gonna put money back in Iowans pockets, money back in teachers pockets, money back in police officers pockets, and it’s going to allow them to spend that money on Main Street Iowa, which is a lot better than us spending it up here in Des Moines.”

University of Iowa President Barbara Wilson and Iowa Board of Regent members applaud during the Condition of the State address delivered by Iowa Governor Kim Reynolds at the Iowa State Capitol in Des Moines, Iowa, on Tuesday, Jan. 11, 2022. During the State Address, Reynolds spoke about childcare, Iowa teachers, material taught in schools, unemployment, tax cuts, and more. (Grace Smith)

Addressing workforce issues 

Reynolds championed the work her administration has done to fix workforce shortages in the state through apprenticeship programs, incorporating work-based learning in schools, and integrating computer science into the curriculum. 

“With these efforts, we’re on the path to giving every Iowan the opportunity to find a rewarding career,” Reynolds said. 

Reynolds said that barriers for working still exist, including the need for child care. 

Reynolds announced that the Childcare Challenge program will be extended to provide 5,000 more childcare locations with grants. 

In his opening remarks to the House on Monday, Speaker Pat Grassley, R-New Hartford, said that affordable child care will be key to getting more people into the workforce.

“This is not an issue that the Republican caucus has really talked about until two elections ago, when we had a class of members come in that made that a priority and an issue that our caucus needs to focus on,” Grassley said. “I’m thankful that we did that and we’ve taken that and run with it.” 

Leadership from both parties say getting more people into available jobs is a priority for this session, but Konfrst said the plan Reynolds laid out in her speech was not the holistic approach she wanted to see. 

“What kind of story are we telling to Iowans to encourage them to stay and to people in other states to encourage them to come?” Konfrst said. “Do we have affordable housing? The governor didn’t mention affordable housing once tonight. Do we have affordable health care? Do we have affordable and accessible child care? Are we the kind of state that is welcoming all families?”

Reynolds said she will be introducing a bill that will reduce unemployment benefits from 26 weeks to 16 weeks while ensuring that those collecting unemployment can’t turn down suitable jobs — the longer someone has been unemployed the lower the wage they are required to accept at an offered position. 

Iowa Governor Kim Reynolds waves to attendees and legislative members during the conclusion of the Condition of the State address at the Iowa State Capitol in Des Moines, Iowa, on Tuesday, Jan. 11, 2022. During the State Address, Reynolds spoke about childcare, Iowa teachers, material taught in schools, unemployment, tax cuts, and more. Reynolds closed her speech with a quote from “Field of Dreams.” “James Earl Jones’ character tells Ray Kinsella, in a baritone voice I can’t imitate: ‘People will come Ray. They’ll come to Iowa for reasons they can’t even fathom.’” (Grace Smith)

Reynolds also said a new reemployment division will be added to the Iowa Workforce Development.

“Unemployment benefits serve an important purpose as a short-term safety net for Iowans who are unexpectedly out of work, through no fault of their own,” Reynolds said. “But we can’t forget these are taxpayer funds, and we have to recognize that we’re living in a time of prolonged low unemployment.”

In November 2021, the last month numbers are available, 61,600 Iowans were unemployed, according to Iowa Workforce Development, which totals a 3.7 percent unemployment rate. Compared to the national average of 3.9.

Iowa’s workforce participation rate — the number of people employed or looking for employment — was 66.8 percent in November 2021, down from 70 percent in January 2020 before the pandemic.

Transparency in education 

Reynolds noted concerns with books taught in public K-12 schools that contain what Republicans have called obscene and explicit content. She said she will introduce legislation to require that schools publish school curriculums, including syllabi and textbooks online, and that schools should maintain an online list of every book available in the school’s library. 

RELATED: Reynolds’ new school rules

In order to let more parents have a choice of where to send their children to school, Reynolds said she will be introducing legislation that allows middle- and low-class families to receive funds allocated towards moving their children to desired districts. 

About 70 percent of those funds will go directly to families to pay for the costs of private education, she said, and the remaining 30 percent will be distributed by the state to smaller school districts. 

Iowa Governor Kim Reynolds exits the House Chamber during the Condition of the State address at the Iowa State Capitol in Des Moines, Iowa, on Tuesday, Jan. 11, 2022. During the State Address, Reynolds spoke about childcare, Iowa teachers, material taught in schools, unemployment, tax cuts, and more. (Grace Smith)

“So to the parents who are listening tonight, who are frustrated with what’s happening,  know that I and members of this Legislature have heard you loud and clear. Enough is enough. Parents matter, and we’re making sure you stay in charge of your child’s education,” Reynolds said. 

Rep. Dave Jacoby, D-Coralville, said in an interview with the DI after the address that both parties are concerned about workforce and education issues. 

“It comes down to, put your money where your mouth is, but also put your policy where your mouth is,” Jacoby said. “You can’t rip into teachers for using a book in the learning process and then in the same breath say, ‘we need more teachers.’”

After Reynolds’ address, Iowa Democratic Party Chair Ross Wilburn delivered a rebuttal online. Wilurn said Iowa Republicans have presented a very narrow definition of what freedom and opportunity mean. 

Wilburn said that the workforce problem that exists in Iowa is because of Republican policies and priorities. 

We can solve the Reynolds workforce crisis by supporting and protecting workers and making Iowa a welcoming place where everyone can thrive,” Wilburn said.