DSM USA Policy HQ - Pro-Growth Tax Policy

The DSM USA Policy Headquarters podcast is a monthly conversation between experts on public policy topics impacting business and the relationship between government and the private sector.  

In this installment of the DSM USA Policy Headquarters podcast, Rob Mauritz, President and CEO of LBS, and Joel Anderson, Director at RSM US and former advisor to Gov. Kim Reynolds leading up to the 2022 legislative session, discuss pro-growth tax policy and the tax reform legislation signed by Governor Reynolds on March 1 this year. 

Overview of Legislation HF 2317

HF 2317 is a bill that focuses on corporate income tax philosophy, individual income tax philosophy and retirement income tax philosophy. Individual income tax will reduce rates to 3.9% by 2026. For tax years beginning in 2023, HF 2317 will exclude income tax on 401(k)s, pensions and IRAs owned by those 55+ or those who are disabled. The corporate income tax will reduce under HF 2317 as well.  

Anderson discussed the options farmers will have when it comes to how they are taxed in retirement as well as employee stock ownership plans (ESOPs). With ESOPs, the employees are bought into the company and want to make sure the company is doing well. When they cash out, they want to make sure they leave the business better – for manufacturing companies in rural areas, ESOPs ensure owners, or employees, have the best interests of the company and community at heart. 

For LBS, as an employee-owned company, that extra money not going to taxes goes to investing and employee retirement. Many ESOPs eliminate the 401k benefit once no longer privately owned, but LBS has not done this. Mauritz said this is a great tool for recruiting and retention. As an ESOP, LBS works together so that all employees benefit. 

Advantages for Small Businesses 

About 80% of Iowa companies are pass-through entities or structured as sole proprietorship, partnership or S-corporation. Anderson said that HF 2317 will make a huge difference to these pass-through entities because they are paying individual rates and savings come back to the individual. Another advantage is keeping people in Iowa after they retire or if they get a promotion offer. In the past, it’s been better to leave Iowa based on income tax, but now it will make sense for people to work in Greater Des Moines (DSM) based on amenities and tax benefits.  

Other topics discussed include connecting businesses with elected officials and the impacts of HF 2317 in the long-term. 

Listen to the entire podcast above. 

Learn more about accounting and taxes for small businesses here. 

The DSM USA Policy Headquarters podcast focuses on public policy topics impacting business and the relationship between government and the private sector. Join us each month to hear from local Greater Des Moines (DSM) experts. To listen to more Partnership podcasts, click here.