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March 21, 2025 |  By: Iowa News Service

Unemployment benefit money comes back as tax cut for businesses

The Iowa Legislature has advanced a bill to provide a one billion dollar tax cut to companies covering unemployment benefits for out-of-work Iowans. The lawmakers reduced the maximum number of weeks Iowans could file for unemployment benefits in 2022 from 26 to 16 weeks. The money the state has saved by not paying the additional benefits went into a trust fund, which has reached nearly two billion dollars. Now, lawmakers are giving half the money back to business in the form of a tax cut. Secretary-treasurer of the Iowa Federation of Labor, Peter Hird, says Senate File 504 is a blow to people who are looking for work and now have a lot less time to find it while watching companies get a tax cut.

"When you take a benefit, a protection for workers and then turn that into a tax savings for employers, it's a totally man-made tax cut, just because of good luck.", Hird says.

The bill now awaits action on the Senate floor. Governor Kim Reynolds said she is following through on a campaign pledge to lower taxes for Iowa companies, making the state more attractive to those considering locating in the state. Hird says labor groups worry about what happens in the event of an unexpected economic downturn. He adds the fears are prominent in rural Iowa.

Hird says, "Especially if you are working in the Ad sector, wehre your jobs at stake and you're talking about giving more benefits to rich people. I feel like that is just something that is resonating around the country right now."

Governor Reynolds has proposed cutting the highest unemployment tax rate companies pay from seven percent to five point four percent, which would save them nearly a billion dollars over five years.