DES MOINES, IOWA (January 29, 2025) — Governor Kim Reynolds introduced the Unemployment Insurance Reform Bill to the Iowa House and Senate.
Gov Reynolds proposes lowering the maximum tax rate to the lowest allowed by federal law (5.4%), cutting the taxable wage base by half, and simplifying the unemployment insurance system by reducing the number of tax tables.
Currently, Iowa has the second-highest taxable wage base in the region and ranks ninth in overall trust-fund balance despite being the 32nd most populous state.
“Iowa is overdue for an overhaul of our unemployment insurance system,” Gov Reynolds said. “Our trust fund balance sits near a record high $2 billion, while unemployment claims are at a record low length of nine weeks. We need to stop over-collecting on Iowa employers and allow them to reinvest savings in their businesses and employees. A simplification of the system is necessary to maintain our momentum in state tax reform and ensure we stay competitive with surrounding states.”
“We want to thank Gov Reynolds for her leadership on key tax issues in the state of Iowa," said Brad Churchill, CEO of US Erectors, a steel company headquartered in Pleasant Hill, Iowa. “From income tax cuts to modernizing, simplifying, and lowering taxes on Iowa's unemployment insurance, US Erectors looks forward to saving money to reward our hardworking employees and to continue to expand and add new jobs in the future.”
“We applaud Gov Reynolds’ continued efforts to make Iowa the best place in the country to own and operate a small business,” Matt Everson, Iowa State Director of the National Federation of Independent Business, said. “Gov Reynolds’s efforts to modernize unemployment insurance taxes by simplifying brackets and lowering wage base thresholds will save small businesses millions of dollars, keep Iowa competitive with neighboring states, and, most importantly, keep the Unemployment Trust Fund solvent."
"With these substantial savings for small businesses in Iowa, we anticipate this money will be used to enhance employee wages, add new workers, buy new equipment or update retail and office spaces,” Everson said. “It’s a true win-win for Iowa's small business economy.”
“ABI is thankful for Gov Reynolds stewardship of the Iowa Unemployment Insurance Trust Fund and her efforts transforming Iowa’s legacy unemployment insurance system into a robust re-employment program that helps return unemployed workers to the workforce in nine weeks,” Iowa Association of Business and Industry President Nicole Crain said. “Now that steps have been taken to aid the success of workers in Iowa, it is sensible to ensure that premiums paid by Iowa employers match the claims required to help Iowa’s unemployed workers.”
“As Iowa looks for additional opportunities to enhance our competitive tax structure, right-sizing the unemployment insurance-tax system should be prioritized,” Iowa Business Council President Joe Murphy said. “Gov Reynolds’s proposal will lead to significant savings for Iowa companies which can then be reinvested back into their companies and employees all while preserving state unemployment benefits for workers in need. This is a win-win scenario for Iowa’s business community and workforce.”
Gov Reynolds’ proposed changes to Iowa’s unemployment insurance tax system are projected to save businesses $974 million over five years.
