House GOP proposes exempting retirement income on 2022 tax form

Republican House Speaker Pat Grassley. (IPBS photo)

House Republicans introduced a bill to eliminate state income tax on retirement income from pensions, IRAs and 401(k)s.

Republican House Speaker Pat Grassley suggests this could prompt some older Iowans to reconsider moving or living more than half the year in another state that doesn’t tax income. retirement.

“I think we are losing a lot of these people who I would say are the pillars of our communities. They are the ones who volunteer. They are the ones who philanthropically support these organizations and foundations in the community,” Grassley said during an appearance on “Iowa Press” on Iowa PBS. “We want to keep these people and they want to stay in Iowa, but while it might be beneficial to just cross the border or move to other states that don’t have these (taxes), I don’t want to not that it’s a barrier to keeping these people in our communities.

Social Security benefits are not taxed in Iowa. This House GOP plan — to extend that exemption to all retirement income — would be implemented for the 2022 tax year. That’s a year earlier than what Republican Gov. Kim Reynolds has proposed. Senate Democratic Leader Zach Wahls said the idea falls short of the goal of targeting tax relief to low- and middle-income Iowans.

“We know people on fixed incomes can sometimes struggle with the tax burden they face,” Wahls said last week. “But, again, if you’re a multi-millionaire and you’re making a really big income from your investments, what have you, I don’t think that makes much sense.”

The governor’s staff estimate that the state would collect $400 million less in taxes each year if income from pensions and other retirement accounts were no longer subject to Iowa income tax.

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