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Proposed constitutional amendment would require supermajority for tax increases • Iowa Capital Dispatch [1]
['Robin Opsahl', 'More From Author', '- March']
Date: 2024-03-05
Legislation was advancing at the State Capitol Tuesday proposing a constitutional amendment to make future tax increases more difficult.
Senate Study Bill 3142 would begin the process of amending the state constitution to impose restrictions on future tax changes implemented by the Iowa Legislature. The measure would prohibit graduated tax rates based on income, requiring Iowa to keep its single-rate individual income tax. It would also require that increases to individual or corporate income tax rates — as well as other taxes “based upon income or legal and special reserves” — receive two-thirds majority support from both chambers. Establishing a new tax would also require two-thirds support.
During a Senate subcommittee meeting Tuesday, Sen. Jason Schultz, R-Schleswig, jokingly debated whether the measure should be called the “bipartisan citizen wealth confiscation amendment” or “citizen wealth confiscation prevention amendment” — saying the measure would help prevent taxpayers from having their income “taken away from them easily, willy nilly,” through tax increases.
“It’s actually very important to me right now, because I’m seeing some things start to slip,” Schultz said. “Both Republicans and Democrats need to realize that tax policy is affected by spending. And when you start seeing spending creeping up for annual, year after year, new good ideas, you can’t have good tax policy.”
The program will instead encourage lawmakers of both parties to work within the means currently available, instead of heading to citizens for more funding by raising taxes, he said.
Advocates with business, banking and tax policy groups supported the proposal. Jake Highfill with Iowans for Tax Relief said lawmakers had the opportunity to make a policy change that would “outlive” their time in office and ensure taxes are kept at lower rates in Iowa. He cited polling from the Iowans for Tax Relief that found a majority of Iowans support a flat tax.
But others, like Mike Owen with Common Good Iowa, said the measure would harm low-income Iowans and undermine the rights of Iowans. He spoke in opposition to flat tax systems, saying lower- and middle-income people pay a higher proportion of their income than wealthy Iowans, compared to a graduated tax where taxes are calculated differently based on an individual or household’s income.
Owen also called the provision raising the bar for passage of tax increases as an “assault on principles of the democracy and equity,” as the measure would give 17 state senators or 34 state representatives the ability to block a tax provision approved by the majority of the Legislature.
“You have to get a majority to pass — it’s a hard hurdle, especially for tax increases, as it is,” Owen said. “This is an incredible burden, especially if you have a situation where, as we believe 10 years from now, we’re gonna get a fiscal crisis. And we’re gonna be cutting services heavily or — that’s what we’re going to have to do, because of the tax cuts passed. People might not like that. And the persons sitting in your seats will be then in a position where they can’t correct it.”
Sen. Dan Dawson, R-Council Bluffs, said the measures adding barriers to some tax changes were necessary to provide some security to families and businesses in Iowa who are depending on the current tax policies to remain in place.
“Any business here in the state has a five- or 10-year business plan, families are always trying to save for retirement,” Dawson said. “To me, this is a good tool that actually secures the gains that we have made to make the state more competitive.”
A House subcommittee was scheduled to consider House Study Bill 721, the companion legislation on the constitutional amendment proposal, Tuesday afternoon.
If passed by the Legislature this year, the proposed constitutional change would have to be approved by lawmakers in the 2025-26 General Assembly before appearing on the ballot for voters in a general election. If approved by the majority of voters, the Iowa Constitution would be amended to include the language.
The constitutional amendment was introduced by Dawson and Rep. Bobby Kaufmann, R-Wilton, as part of a larger tax plan in early February. Other proposals included a bill to gradually eliminate Iowa’s individual income tax, with a drop to 3.775% in 2026. That plan was an alternative to Iowa Gov. Kim Reynolds’ proposal building off a 2022 law to reduce the individual income tax rate from 5.7% to 3.65% retroactively for 2024, and drop to 3.5% in 2025.
The Senate Ways and Means committee approved the governor’s income tax cut proposal in February. While Dawson thanked Reynolds for her proposal at the time, he said lawmakers werei still continuing discussions on the best path forward for income tax cuts.
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