Jeanne Visser | Staff Writer
“Tax reform has been my top priority over the last 10 years in state government,” declared Randy Feenstra, state senator from Hull.
When Gov. Kim Reynolds signed Iowa’s newest tax reform bill a month ago, Feenstra saw the accomplishment of years of work.
A Republican, Feenstra has served in the Iowa Senate since 2009 and currently chairs the ways and means committee. His professional experience includes working for The Foreign Candy Company, Hull’s city administrator, Sioux County treasurer, ISB Insurance and now a professor at Dordt College.
The 160-page tax reform bill was the largest bill to be passed in Iowa over the last decade and Feenstra authored much of it. He said it was long overdue.
“Iowa’s taxes are the most complicated in the nation. Iowa has the fourth highest individual tax rate in the nation and the highest corporate income tax at 12 percent. Because of that high rate, we’ve created a lot of tax credits and deductions in an effort to lower rates, but then government picks winners and losers. It just further complicates the system,” he explained. “I’ve always thought that we can do better than this.
“In the new bill we lowered rates, simplified the system and created more parity in the system.”
The problems with Iowa’s tax laws were especially evident to Feenstra when he served as Hull’s city administrator and the Sioux County treasurer.
“It’s really difficult to draw businesses to your town and state when we have such high taxes,” he said. “Especially when you’re next to South Dakota, which doesn’t have income tax. The new tax laws should help Iowa be competitive.”
Even though tax reform has been Feenstra’s priority for years, he couldn’t make anything happen until Republicans gained the majority in the senate two years ago. And this year Reynolds made changes in the tax policy a cornerstone of her agenda.
Changing Iowa tax laws was also needed because of a new federal tax bill, which takes effect in December.
“Under the old law, individual Iowans would have seen a large tax increase,” explained Feenstra. “Because of the things the federal government did, we had to make some decisions.
“I’ve enjoyed this process and learned a lot about the Iowa tax system,” he added. “This has been my passion in Des Moines and it’s fun to see all the hard work that went into this bill get passed and signed by the governor.
“There are so many pieces to this new tax bill. It’s a five-year plan and is also based on the economic growth of the state. If the economy continues to grow, tax rates will continue to drop. We also closed a lot of tax loopholes and spent lots of time making sure individual groups were protected and one didn’t get hit harder than another.”
A highlight of the new law is the modernizing sales tax. Taxes will now be collected from online sales, video-streaming services, digital video rentals, ride-share services and taxis.
“Last year Iowa lost approximately $100 million in taxes because people were buying online,” said Feenstra. “A lot of states are working to find ways to collect sales taxes on these transactions.”
The department of revenue expects sales tax changes to raise an additional $66.7 million in fiscal year 2019. By fiscal year 2024, those changes should add $177.8 million in new revenue.
Iowa taxpayers and businesses will see their tax liabilities lowered beginning in the 2019 tax year.
The bill also benefits low- and moderate-income Iowans, added Feenstra. “They’ll get more reductions than the wealthy.”
Beginning in 2019, the plan reduces the tax rate in each of Iowa’s nine existing tax brackets. If revenue estimates are met in 2023, the plan reduces the number of tax brackets from nine to four and reduces the top bracket from 8.53 percent to 6.5 percent.
“This is an overarching bill with so many benefits for businesses and individuals. And we’ll continue to adjust it to benefit all Iowans,” said Feenstra.