SIOUX CITY, Iowa (KCAU) — A majority of Americans currently pay progressive income tax, but now Iowa is looking to become the tenth state to implement a flat tax rate.

“Despite the historic 2018 tax cuts, we’re still taking too much from Iowa’s paychecks. That needs to stop and it needs to stop now,” said Iowa Governor Kim Reynolds during her Condition of the State address on January 11.

Governor Reynolds’ message during her Condition of the State address shows the legislature’s appetite to approve more tax cuts, using the state’s billion-dollar surplus as a reason for the change, but a USD economist explained the immediate impact a flat tax would have on Iowa’s economy.

“We would expect the direct effect of that to be less revenue and it sounds to me like the intent of this is actually to lower the revenue because they feel like they have plenty,” said USD economics professor Mike Allgrenn.

The nonpartisan Legislative Services Agency reported that by 2026, when the flat tax would be fully implemented, Iowa’s revenue would be reduced by $1.6 billion, but Reynolds said she believes that lost revenue will still be spent in the state.

“Yes, we’ll have less to spend once a year at the Capitol, but we’ll see it spent every single day on Main Streets, in grocery stores, and at restaurants across Iowa. We’ll see it spent in businesses instead of on bureaucracies,” said Reynolds.

Critics of a flat tax say it punishes low-income individuals who will be forced to pay the same rates as even the wealthiest Americans, but District 2 State Senator Jeff Taylor said the simplicity of a “one size fits all” tax rate is advantageous.

“The income tax ought to be simple enough that you can put it on a postcard-size piece of paper. Now I’m not promising that with an Iowa flat income tax, it’s probably going to be a little bit bigger than that, but the goal was to simplify it,” said Taylor.

If Governor Reynolds successfully passes this year’s tax reform bill at the proposed 4% rate, Iowans will pay the third-lowest flat tax rate in the country.