The Iowa House and Senate have been working towards reducing taxes on commercial, industrial, and railroad properties (CI&R) for the past two legislative sessions. However, both the Senate and the House proposals for the current session are both costly and play to a myth about Iowa taxes on businesses. Both plans differ in their impact on small businesses versus large businesses. The Senate approach proposes a tax credit to property owners while the House bill would replace the current rollback with a phased reduction in the assessment ratio for CI&R property. Both proposals potentially carry implications for local services offered across Iowa by cities, counties, and school districts.
The Iowa General Assembly is also considering expanding Iowa’s Earned Income Tax Credit (EITC), which is a way to mitigate the amount of tax that individuals or families with medium or lower income have to pay. The EITC incentivizes work and helps offset the burden of payroll and income taxes. The Cedar Rapids Gazette editorial board supports this expansion, arguing that a state that provides tax breaks to large corporations should be able to afford to provide a justifiably bigger break to working families.
Raising a family in Iowa can be expensive, and even at the median wage of around $15 per hour, working full-time, year-round is not enough for families with children to cover basic needs like food, rent, childcare, transportation, and other essentials. The federal and state EITC, along with other refundable credits, can raise the after-tax income of a low-wage worker by approximately $4,100, closing a quarter of the gap between basic needs and disposable income.
However, these credits are reduced as income increases. An increase in the state EITC from 7 percent to 20 percent of the federal credit would help undo some of the problems of family income adequacy. Increasing the Iowa EITC to 20 percent of the federal would not be enough to lift minimum-wage families to a no-frills budget level, but it would help fill the basic-needs gap for over 200,000 Iowa households, including 37 percent of Iowa children.
In conclusion, while the Iowa House and Senate work to reduce taxes on commercial, industrial, and railroad properties, both proposals are costly and play to a myth about Iowa taxes on businesses. Both proposals potentially carry implications for local services offered across Iowa by cities, counties, and school districts. Meanwhile, an increase in the Iowa EITC to 20 percent of the federal credit would help undo some of the problems of family income adequacy and would help fill the basic-needs gap for over 200,000 Iowa households, including 37 percent of Iowa children.