Extremes see most benefit from Iowa tax reform
The extremes will see the most benefit under a tax reform package now awaiting Governor Reynolds signature.
The package - a priority for Republicans - was the last hurdle for the Iowa legislature to wrap up its 2018 session. The agreement promises $2.1 billion in tax savings over six years with cuts to both individual income tax rates and corporate tax rates.
An analysis by the Iowa Department of Revenue found the extremes - the low income and high income Iowans - will see the largest shares of the cuts while the middle class would see smaller cuts.
According to the review, 96-percent of Iowans would pay the same or less on their 2019 tax return with the average person saving 243-dollars a year. But whether you see a savings will depend on your income.
According to the review, Iowans making $10,000 to $20,000 a year will see the largest percentage cut - 45.5% - but that only amounts to about $18 a year.
Wealthy Iowans - in the top 3 brackets - will see the next largest cut as a percentage. Iowans making the $250,000 to $500,000 would save 13.7% or $2,593. Those making $500,000 to $1 million will see a 16.3% cut, saving $6,465. And those making $1 million or more will see a 15% cut, saving an average of $18,773.
Those in the middle brackets see a much smaller benefit. Those making $40,000 to $200,000 will see a tax savings of less than 8% - averaging anywhere from $125 to $718 a year.
Those middle tax bracket are also expected to see higher rates of Iowans paying more in taxes in 2019, as much as 7-percent.
Overall, those individuals see the biggest benefits from the tax reform, accounting for 402 million dollars in total tax cuts in fiscal 2019. The corporate income tax changes are expected to actually increase revenues by 22-million dollars in 2019 with savings kicking in for 2021. Those savings would still amount to 10% of the savings in individual tax returns.