Week 2 at the Capitol has been very busy. Last week the Governor laid out her comprehensive tax plan for the 2022 legislative session during her speech. This week more details and fiscal information are available as House Study Bill 551 was released publicly. The bill has landed in the Ways and Means committee of which I am the chair, so we are taking an extensive look at how to implement her ideas. The following is a division by division explanation:
Division I—Sale of Certain Qualified Stock—Net Capital Gain Exclusion
This division provides an employee-owner one lifetime election to exclude from income tax their net capital gains from the sale or exchange of capital stock (ESOPs). This exclusion is phased in over three years starting tax year 2023.
Division II—Retired Farmer Lease Income Exclusion
This division provides that a retired farmer’s income from rental of their property is exempt from tax. The farmer must be 55/farmed for at least 10 years. If the farmer choses this exemption, they are not eligible for the capital gains exclusion provided by Division III. This change begins tax year 2023.
Division III—Retired Farmer Capital Gain Exclusion
This division provides a single lifetime exclusion of capital gain on the sale of a retired farmer’s land or livestock. This change begins in tax year 2023.
Division IV—Individual Income Tax Rates—Tax Years 2023-2025
This division strikes the tax brackets and rates that would go into effect in tax year 2023 and reduces them further in tax years 2023, 2024, and 2025.
Division V—Individual Income Tax—Flat Rate
This division picks up where Division IV left off. It provides for a flat tax of 4.0 percent on all taxable income. This begins in tax year 2026.
Division VI—Corporate Income Tax Rates—Adjustments
This division provides for the corporate tax rates to be reduced based on a revenue trigger. It provides that in a year where corporate tax revenue exceeds $700 million, the excess is used to reduce the corporate rates the following year. This change begins in tax year 2023.
Division VII—Corporate Income Tax—Flat Rate
This division provides that when the corporate rates are reduced (by Division VI) to a point where all rates equal 5.5 percent, the corporate tax rate is codified at a flat 5.5 percent.
Division VIII—Retirement Income
Currently, Iowa Code provides for an income tax exclusion for the first $6,000 of retirement income. This division provides that all retirement income would be excluded from tax. The change begins in tax year 2023.
The total fiscal impact of the proposal is -$245.13 million in FY23, -$594.29 million in FY24, and -$833.61 million in FY25. Years beyond that do go above one billion. A subcommittee has been assigned to the bill.
On a personal note, my mother in-law Mary Morgan Squires turns 100 on Friday. Congratulations and Happy Birthday to her. That’s quite an accomplishment.
If you have any concerns or comments on these or any other issues, feel free to contact me at my legislative email which is lee.hein@legis.iowa.gov or call me at 319.480-1997. I look forward to hearing from you.
Upcoming Forums:
Friday, January 28th I will be in Monticello with the Jones County Economic Development Reform from 12:00-1:00 pm
Friday, February 4th, I will be in Manchester at the Delaware County farm bureau from 10:00-11:30 am
Lee Hein 