Iowa governor wants higher sales tax to help water, environment

Posted: Thursday, January 16, 2020

Iowa Gov. Kim Reynolds (R) asked lawmakers yesterday to consider increasing the state sales taxes by 1 cent to raise money to boost funding for water quality, the environment and mental health care programs.

A 1-cent sales tax increase is expected to generate about $540 million in new revenue a year starting in 2021.

Some of the funding will go into water quality and environmental programs that voters passed 10 years ago in a constitutional amendment but the Legislature never funded.

Reynolds is proposing using $100 million a year for water quality and $52 million a year for conservation and outdoor recreation programs from the sales tax.

Some of the state’s previous funding for such programs will move into the new fund, however, raising concerns about whether it’s a net gain for water quality and the environment.

Reynolds said the increase in funding for water quality is about 31% and for conservation about 14%.

To offset the tax increase, she proposed an income tax cut by an average additional 10% beyond the rates set in the 2018 tax cut for next year.

Reynolds said the top income tax bracket in Iowa a year ago was nearly 9%, and with a new round of cuts she proposes, it would be 5.5% by 2023.

Her proposal was part of her annual Condition of the State address delivered to lawmakers on the second day of the 2020 session.