Iowans will see an increase in their disposable income in 2024.
The state will reduce its top marginal income tax rate from 6% to 5.7% starting on January 1, 2024. Governor Kim Reynolds indicated that further adjustments are possible when legislators meet in January. It is worth noting that the state closed fiscal year 2023 with a surplus of $1.83 billion.
Governor Reynolds believes that a surplus is not a result of the government not spending enough, but rather an over collection from the hard-working people of Iowa. She sees the potential in growth-oriented policies and fiscal restraint to create positive outcomes. As a result, she is committed to cutting taxes and returning the surplus back to the people of Iowa in the next legislative session. Reynolds is eager to ensure that the benefits of the surplus are directly received by the citizens of Iowa.
In 2022, Reynolds took a significant step towards achieving a 3.9% flat income tax rate by signing the income tax cuts.
The corporate tax rates for businesses with over $100,000 in income will be reduced from 8.4% to 7.1%. Meanwhile, companies with less than $100,000 in revenue will have a lower tax rate of 5.5%.
Lawmakers have made significant changes to the tax system, including reducing the inheritance tax from 4% to 2% and the franchise tax from 4.7% to 4.4% starting in 2024.
In the legislature, Reynolds has enacted a second round of tax cuts. According to the Revenue Estimating Conference, last year’s cuts returned $561 million to the taxpayers without causing any harm to the state’s financial position.
Committee Chair Kraig Paulsen stated that no changes are necessary for the fiscal year 2024 budget. The committee projected that Iowa’s general fund revenue for fiscal year 2025 will reach $9.6 billion.
The Iowa lawmakers will be returning to Des Moines for the start of the 2024 legislative session on January 8th. On January 9th, Governor Reynolds will deliver her address to the Legislature.
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