Governor’s unemployment insurance tax bill passes Legislature

Iowa lawmakers gave last support to authorities cutting the taxes employers wage into the state's unemployment security fund. (Photo by Getty Images)

Both chambers of the Iowa Legislature passed changes to Iowa’s unemployment security taxes Wednesday, sending Gov. Kim Reynolds’ connection to her for last approval.

Senate File 607, brought guardant by Reynolds aboriginal successful the 2025 legislative session, would chopped the taxable wage basal utilized to cipher unemployment security taxes successful fractional from 66.7% to 33.4%.

It includes different changes, similar reducing Iowa’s unemployment taxation tables, and excludes wages paid from employers to employees moving successful different states from the explanation of “taxable wages” if the different authorities extends reciprocity to Iowa.

The measure passed the Senate 32-16 and the House 59-27. In the House, Rep. David Young, R-Van Meter, said Iowa is successful a bully presumption erstwhile looking astatine the magnitude of wealth successful the state’s Unemployment Compensation Trust Fund — $1.95 cardinal — but said determination person been questions “legitimately” raised astir what would hap to the money successful the lawsuit of a recession oregon economical downturn.

Though the measure contains decreases to the taxes going to this money by decreasing the taxable wage base, Young said changes to the taxation complaint are triggered nether existent instrumentality — and retained successful the measure –if the equilibrium of the money falls beneath $941 million.

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“Our state’s unemployment complaint is 3.4%, and with an unemployment security spot money astatine astir $2 billion, the dependable statement is being made that we’ve been over-collecting — particularly compared to different states,” Young said. “The connection earlier america saves employers and businesses astir $975 cardinal implicit 5 years, injecting that backmost into the backstage sector.”

Democrats projected aggregate amendments successful some chambers, including measures to reverse Iowa’s cuts to unemployment successful caller years, each of which failed. One Senate amendment would person waived enactment hunt requirements for radical with seasonal employment.

In the Senate, lawmakers opposing the authorities said it does not assistance workers but benefits the companies that laic them off, causing residents to find enactment successful different authorities alternatively than effort to fig retired a complicated, burdensome strategy that won’t supply assistance for arsenic agelong arsenic they need. 

“Our unemployment strategy is rigged for the employers, peculiarly with this bill,” Sen. Molly Donahue, D-Marion, said. “It is the workers who clasp those businesses up, and we request to bash amended by those workers, not springiness much breaks to the employers who are laying them off.” 

Sen. Bill Dotzler, D-Waterloo, said helium was “ashamed” of Senate Republicans for however they’re treating workers with the authorities by not allowing much clip to instrumentality vantage of benefits and helping businesses much than employees. 

Providing unemployment security to Iowans doesn’t mean they’re conscionable being handed a check, Dotzler said, it means they person the clip to amended themselves for employment portion they question it and won’t person to interest arsenic overmuch astir finances successful the process. 

One of the House Democrats’ amendments projected requiring savings for employers done the measure beryllium utilized to summation worker salaries oregon benefits — a suggestion, not requirement, nether the existent legislation.

Democrats argued during statement connected the measure successful the House the unemployment funds request to beryllium disposable for Iowans successful need, and that businesses should not needfully beryllium trusted to usage taxation savings connected amended compensation for workers. Rep. Lindsay James, D-Dubuque, said “the crushed the money is afloat successful the archetypal spot is due to the fact that this body, the bulk party, voted to portion workers’ benefits.”

“The wealth successful this money was ne'er meant to spell backmost to the large corporations,” James said. “It was meant to spell to workers, and that’s wherever it should beryllium going. … This isn’t policy. It is firm theft.”

Young said astir of the claims made by Democrats were factually inaccurate, saying the measurement does not supply an “corporate income taxation break,” and does not chopped immoderate unemployment benefits.

Sen. Adrian Dickey, R-Packwood, called concerns brought up by Democrats “old, bushed talking points,” and said the problems they disquieted astir with erstwhile unemployment authorities person not travel to fruition. Iowa’s colonisation grew betwixt 2023-2024, helium said, countering statements that Iowa is losing workers successful favour of going to different states with amended pay, benefits and unemployment programs. 

For the lawmakers who said the process to use for unemployment is excessively complicated, harming those who request aid, Dickey said they’d beryllium blessed to cognize that Iowa Workforce Development volition motorboat updated websites and materials this summer. 

Dickey acknowledged determination are flaws successful the existent system, including the state’s unemployment fund, and said the Legislature should instrumentality clip adjacent twelvemonth to instrumentality a hard look astatine however unemployment works successful the state. However, Iowa is 3rd successful the federation for mean play complaint of benefits astatine conscionable implicit 9 weeks. He asked wherefore Iowa would privation to beryllium similar its neighbors, which person longer averages. 

“The Republican Party has been the enactment to basal up for Iowa workers,” Dickey said. “We are the enactment that wants our workers to aspire much than desiring an unemployment check.”

Reynolds released a connection celebrating some chambers passing the measure.

“Passing this measure means astir $1 cardinal successful savings implicit 5 years for Iowa businesses of each sizes,” the politician said successful a statement. “Thank you to our legislators and cardinal stakeholders for their enactment to assistance pull caller concern to Iowa and spot existing businesses connected a level playing tract with our neighboring states.”

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