Iowa Tax Reform Legislation Will Boost the State Economy

The passing of the federal Tax Cuts and Jobs Act in December 2017 made it necessary to bring the Iowa tax code into conformity with the new federal code. With SF 2417, the Iowa legislature used the new federal law as an opportunity to simplify the state tax code and to cut the state’s marginal income tax rates. The Beacon Hill Institute for Public Policy Research (BHI) estimated the effects on the state economy of SF 2417, using its Iowa STAMP (State Tax Analysis Modeling Program). We found that the legislation will bring about a growing economy that produces higher private employment and disposable income and, ultimately, higher investment. It will initially, in 2019, create 4,840 jobs, and increase inflation-adjusted disposable income by $351 million. Investment will initially decrease by $12 million due to the increases in the sales tax and corporate income taxes.

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