Gov. Kim Reynolds (R) is expected to sign the approximately $2.2 billion tax cut into law, setting in motion a plan that phases in the cuts over several years and includes a backstop to ensure some tax cuts are only enacted if state revenue is high enough.
The plan's backstops are being pitched as a defense against what happened in Kansas, where huge tax cuts failed to produce the economic growth Republicans promised. The result was a state budget crisis, steep cuts to education and other government services and, eventually, tax hikes to close the gap.
"Kansas leaped almost overnight into their tax cuts," said state Sen. Jim Carlin (R), who backed the tax measure with all the other members of his caucus. "We're going to take an incremental approach to make sure our bills get paid."
But Democrats and some independent tax experts think Republicans are deluding themselves into thinking they can have their tax cut now without having to enact big spending cuts later, and that the plan blows a hole in the state's budget even if the additional cuts do not take effect.
"I'm telling my constituents, 'Click your heels, Toto, because tomorrow we're going to be in Kansas,' " said state Sen. Herman Quirmbach (D), who is also an economics professor at Iowa State University. "This is the most fiscally irresponsible piece of legislation in Iowa's history. It's a death warrant for public education in the state."
In Iowa, GOP legislators say the measure designed to potentially prevent one-third of their cuts from taking effect — a "trigger" that stops certain cuts if state finances look bleak — puts them on firmer footing than Kansas, ensuring they do not face the same fate.
The trigger specifies that the additional $200 million in annual tax cuts will take effect only if the state has at least $8.3 billion in tax receipts in 2022, a target that would require annual growth in tax receipts of 5 percent or more for the next four years, more than is expected
For the first four years, the tax cuts — reducing income taxes and taxes on "pass-through" business entities — will cost about $400 million annually. That number goes up to $643 million annually in 2023 if the additional cuts go into effect.
Some independent tax experts warned lawmakers could use budget gimmicks to get around the trigger, by, for instance, temporarily passing a higher sales tax to meet the requirements that would ensure the additional cuts take effect.
Others note that the trigger allows Republican lawmakers to tout bigger tax cuts than may really ever be enacted. The cut set to start only in 2023 is geared substantially more toward middle class taxpayers than the individual tax cuts that start immediately, which primarily benefit wealthy Iowans, said Peter S. Fisher, an analyst at the Iowa Fiscal Partnership.
"The trigger is a politically expedient way for lawmakers to claim they’ve cut your taxes without having to do anything immediately to make up for the consequences of reducing revenue," said Meg Wiehe, of the Institute on Taxation and Economic Policy, a left-leaning think tank.
About 75 percent of the cuts from the tax plan go to those earning more than $100,000 every year, according to Fisher, of the Iowa Fiscal Partnership.
Even including the cuts that may not go into effect, Iowa's tax overhaul is significantly smaller than that of Kansas, said John Hicks, executive director of the National Association of State Budget Officers.
But many of the goals are the same. As with the Kansas plan, Iowa is slashing rates on the businesses that operate as "pass-through" companies. The top tax rate in Iowa could fall from 8.98 percent to as low as 6.5 percent, mirroring the changes in Kansas, which cut its rate from 6.4 percent to 4.9 percent.
Republican lawmakers in Iowa bristle at the comparison. "It's very fiscally responsible," said state Sen. Jack Whitver (R) of the Iowa revamp, before adding definitively: "This will not lead to education cuts."
But some analysts are skeptical. "The trigger could be a backstop against total calamity because it means they don't cut taxes during a recession," said Richard Auxier, of the Tax Policy Center, a nonpartisan think tank. "But it's not a backstop against future budget problems."
Correction: An earlier version of this post incorrectly stated that the Iowa tax code had been signed on Saturday. Gov. Kim Reynolds is expected to sign it soon.