A tax break for businesses cleared the Iowa Senate and House in the final hours of the 2025 Iowa Legislature. The bill reduces the business tax rate for the state fund for unemployment benefits. According to Representative David Young, a Republican from Van Meter, the current tax rate was set in 1987. “With an Unemployment Trust Fund at almost $2 billion, the sound argument is being made that we’ve been over collecting, especially compared to other states,” Young said. “The proposal before us saves employers and businesses approximately $975 million over 5 years, injecting that back into the private sector.”
Governor Kim Reynolds has been pushing for this bill since last year, and it finally passed the House and Senate with GOP support on Wednesday. Democrats, however, were not on board. Representative J.D. Scholten, a Democrat from Sioux City, voiced his concerns, stating that the legislature isn’t looking out for working-class Iowans. “We’re living in the second gilded age with massive income inequality, record economic concentration, and expansive corporate greed,” Scholten said. “It’s bills like this that put a thumb on the scale towards billionaires and towards massive multinational corporations.”
Some Democrats pointed out that the Unemployment Trust Fund balance is so high because of the reduction in unemployment benefits from 26 to 16 weeks by Republican lawmakers. Senator Janet Petersen, a Democrat from Des Moines, emphasized the importance of focusing on helping laid-off workers. “You want to pull money out of Iowa’s unemployment insurance system to give another corporate tax break to companies that are laying them off,” Petersen said. On the other hand, Senator Adrian Dickey, a Republican from Packwood, assured that the fund is stable due to state law triggering higher tax rates if necessary. “If…the fund starts dipping to the point where it looks like it’s in danger, that the claims going out are more than the monies go in,” Dickey said, “…there’s mechanisms put in there to protect that.”
In a written statement, Governor Reynolds expressed her belief that Iowa’s unemployment insurance tax has “needlessly punished” Iowa businesses and that the bill will “end the over collecting.
