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Iowa Gov. Kim Reynolds has signed into law a bill cutting the taxable wage base for Iowa’s unemployment insurance system, one of her goals from the 2025 legislative session.
The governor held a bill signing event Thursday for Senate File 607, at U.S. Erectors in Pleasant Hill, one of the businesses she said the new law is intended to help. The measure, which goes into effect July 1, will cut in half the taxable wage base used in collecting unemployment insurance taxes, from 66.7% to 33.4%. It also modifies employer contribution rates and excludes wages from the unemployment insurance system’s definition of “taxable wages” paid by employers when the employees work in another state in cases where reciprocity applies.
“It’s a signature piece of legislation, one of my top priorities this session, and a key part of our ongoing efforts make Iowa’s economy stronger, more competitive and built for the future,” Reynolds said.
Reynolds said the changes are “long overdue,” saying Iowa’s unemployment insurance taxes have “needlessly over-collected from our businesses” for years. With $1.95 billion in the Unemployment Compensation Trust Fund, the governor said Iowa had the ninth largest unemployment trust fund in the country despite being 32nd in state population.
By lowering the amount employers pay into the fund, Reynolds said businesses are projected to save nearly a billion dollars over the next five years. U.S. Erectors, which hosted the event, is projected to keep $85,000 in the next year due to the change, she said.
Brad Churchill, CEO and co-founder of U.S. Erectors, thanked Reynolds for moving the measure forward, saying it “provides meaningful relief to employers across Iowa, while maintaining a full scope of benefits for employees for their time of need.”
“Early projections and estimates are that the bill would generate the savings of up to $800 million for businesses statewide,” Churchill said. “For companies like ours, those savings can be reinvested directly into our workforce through hiring, wage increases, purchasing of new equipment and expanding our facilities for growth.”
While supporters of the bill said the new law is correcting overpayments into the Unemployment Compensation Trust Fund, Democrats argued the change will mean less money is available to help Iowans when they lose their job, tying it during floor debate on the measure to other changes made to Iowa’s unemployment system in recent years.
Rep. Daniel Gosa, D-Davenport, said in a statement Thursday the change is providing more money to employers who cut jobs in Iowa.
“While Iowa families struggle and Iowa’s economy ranks dead last, Gov. Reynolds and Republican lawmakers are handing out a $1 billion tax break to big corporations, paid for by raiding funds meant for laid-off workers,” Gosa said. “In 2022, Iowa Republicans slashed unemployment from 26 weeks to 16. Now they’re handing out tax breaks to corporations that lay off workers and ship jobs overseas. Iowa workers shouldn’t be footing the bill for corporate tax breaks.”
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