Iowa’s tax code has been a focus for Iowa Gov. Kim Reynolds and state lawmakers over the last several legislative sessions.

In 2023, the Legislature capped property tax levy rates for cities and counties based on their growth. The law also created a $6,500 homestead exemption from property taxpayers over the age of 65 by fiscal year 2027 and an exemption for veterans. Last year, Reynolds and lawmakers signed off on legislation to accelerate the state’s transition to a flat 3.8% income tax.

As lawmakers convened Monday for the 2025 session, additional property tax reform is on the radar for the Republican majorities in the House and Senate.

During the Business Record’s annual Legislative Forecast event on Tuesday, a panel of six experts discussed what changes Iowans may see and what fluctuating tax revenues mean for state businesses, residents and local governments.

The panel also covered what could happen with housing, child care, unemployment insurance and artificial intelligence as lawmakers begin to file and debate bills this year at the Capitol.

The panelists included:

• JD Davis, vice president of public policy, Iowa Association of Business and Industry
• Chelsea Hoye, director for government affairs, Iowa League of Cities
• Ryan Moon, director of government relations and public policy, Greater Des Moines Partnership
• Joe Murphy, president, Iowa Business Council
• Mollie Ross, vice president of operations, Technology Association of Iowa
• Dave Stone, advocacy officer, United Way of Central Iowa

Here are five takeaways from the event.

More property tax changes need everyone ‘at the table’

The push by Republican majorities in the Iowa House and Senate and Iowa business industry organizations to reduce property taxes needs to be a “healthy debate” among lawmakers, taxpayers and taxing entities like cities, schools and counties, the panelists said.

Murphy said Iowa is ranked 32nd in the country in terms of property tax climate for businesses. “Look, we think that property taxes ought to be reduced,” he said. “When you look at the [property] valuations that are out there, when you look about creating a competitive, holistic tax system, we’ve made some really great progress over the last several years in a bipartisan way.”

Hoye said the state Legislature’s moves to make nine changes to property tax collection in 12 years has made it harder for localities to execute long-term planning on services like infrastructure, clear water, sewer systems and public safety. “The idea of placing some additional caps on local revenues without providing alternative solutions undermines cities’ abilities to grow at the pace the business community desires,” Hoye said. “Investments in quality of life, amenities tailored workforce, housing and infrastructure are crucial to creating communities where people want to live and work.”

Davis said everyone “should be at the table” as the Legislature debates how to alter the property tax code this session, including local taxing authorities. He said ABI member businesses have people who serve on local school boards, county boards of supervisors and city councils who could have an understanding of both sides of the debate. “So right now, get everybody’s arms around a big idea, get it on the table, and then just start making some decisions and take as many opinions into account as you can,” Davis said. “We’re going to really just try to be the supporters of the debate at this point.”

Legislating artificial intelligence

Ross said the first task related to AI is to “help legislators come to a consensus on what artificial intelligence is.” She said as Iowa businesses start to find more practical applications for the current iterations of AI, many companies have deployed the technology for years. “And so the last thing that we want to do is suddenly hamstring companies and have them moving backward from technology that they’ve come to rely on and have been using safely for a long time,” she said. Ross said it’s important to consider current state code and amend the language to include terms like “machine-generated content or decision-making.”

“I think these can make for far more efficient actions, likely quicker protections from potential harms for Iowans, and hopefully avoid some of the potential unintended consequences that could come when we’re trying to legislate something that is moving so quickly,” Ross said. She said AI regulation would be better to come from the federal level.

Davis said 18 months ago a piece of proposed legislation on how to harness AI was brought to ABI’s attention, leading the organization to poll its members about their views on the technology. “There is a high level of regard for artificial intelligence being brought into the manufacturing process and other industries we represent, and the No. 1 focus that they encouraged us to talk about was we need AI workforce,” Davis said. “We need people that we don’t have to go out and hire a consultant to figure out how we might put applications into our businesses. We would like to embed those folks in our businesses so they can see our operations, understand how it works, and become a trusted boardroom person that we can talk to about how we’re going to leverage to do these things.”

Unemployment insurance reform

Business organizations are urging legislators in 2025 to reduce the amount of money companies are required to pay into the state’s unemployment insurance system. In her Condition of the State address on Tuesday night, Gov. Kim Reynolds said she intended to reintroduce legislation this session that would reduce that tax on businesses by half.

“We think that there are some really great opportunities there for Iowa businesses to lower those taxes for businesses. There’s been an overcollection over the last several years, decades, really, on that topic,” Murphy said.

Davis said that the state’s unemployment trust fund balance will soon go over $2 billion, a figure cited by Reynolds in her address Tuesday. According to Davis, the payout of the fund annually is around $200 million and about $400 million is collected. ABI believes that “there’s a right-sizing that presents itself” in the unemployment tax collection system. “The unemployment system in Iowa is best thought of as an insurance program,” Davis said. “Every employer pays a premium into a trust fund, and anybody that finds themselves unemployed for no fault of their own is going to receive benefits out of that program. So the very first thing that we need to do when we’re looking at an insurance program is making sure that premiums meet benefits — make sure they’re not short of what the benefits need to be [and] make sure they’re not long.”

Innovation and emerging technologies

TAI wants to see lawmakers continue to provide incentives to companies to invest in Iowa-based research and development or consider establishing “regulatory sandboxes that would allow companies to test technologies in safe and controlled environments,” Ross said. She said it’s important to see continued support at the statehouse for the Iowa Economic Development Authority’s Angel Investor Tax Credit and Innovation Tax Credit. “These programs can often help bridge the funding gap that exists and help make Iowa a more attractive place for entrepreneurs and for startups specifically,” Ross said. “And knowing those are often critical components to our larger corporations as well. They’re heavily invested in the technology as well as the workforce that comes out of startups and new companies here in our state.”  

More state investment for housing

All the panelists agreed that housing is one of the top workforce development tools that needs to be pursued by lawmakers. Stone said United Way wants to see more work on providing supportive permanent housing for Iowa’s unhoused population.

Iowa Economic Development Authority says the state will need approximately 20,000 to 25,000 new single-family homes over the course of the next five to six years, Murphy said. “That’s going to take some state investment. So what can we do with respect to the workforce housing tax credit, for example? Increasing that from its current threshold of $35 million, seeing if we can get that up to maybe even $50 million to really offload some of that backlog and really start to spur some economic and community development. Not just in the urban areas, of course, but throughout the entire state of Iowa, concentrating on those rural parts.”

Income tax exemption for child care providers

Stone said for many Iowa families, child care is the most expensive item in their budget, outpacing housing. He said one of the few sources of financial assistance currently for child care is the state’s Child Care Assistance Program. The Legislature increased that program’s entrance limits in 2024, and Reynolds announced several new programs aimed at bringing down cost and access barriers on Tuesday.

“We’re also talking about young families with young kiddos who are just starting out in their careers, and when you’re sending your kiddo to one of our state’s universities or colleges, there are grants and there are loans and there are supports, and when they’re on the early part of life, there’s really nothing besides the state’s child care assistance program,” Stone said.

“So a few other things we’d like to see, potentially state income tax exemptions for those child care providers. Again, they’re not making much money. They don’t have a lot of tax liability, but that is a potential way for us to, at the back end, artificially increase their hourly salaries through a nice tax return. And anything we can do to take that pressure off of the centers, to raise pay, because the only thing that those centers can do is raise the price for families, which we already know it’s exorbitant for our families of all income levels.”

To rewatch the full Legislative Forecast event, click here.