From the Summer 2026 edition of The Prairie Progressive, Iowa’s oldest progressive newsletter. The PP is  funded entirely by reader subscription, available in hard copy for $15/yr.  Send check to PP, Box 1945, Iowa City 52244. Click here for archived issues

by Marty Ryan

This year’s November 3rd ballot will offer Iowa voters the choice of accepting or rejecting an Iowa constitutional amendment that is similar to an amendment proposal proffered to
voters over twenty-five years ago.

If the amendment is approved by voters this fall, it will require a supermajority of vote in each chamber of the Iowa Legislature if a bill increases the individual income tax rate
or corporate income tax rate, or the rate of any other type of tax based upon income or legal and special reserves. This poses several questions. Is this necessary? Or is it another attempt by Republicans to control the business of future Iowa legislatures when Democrats are the majority party? What is “legal and special reserves?” Why did those who introduced this not consider sales tax, excise tax, real estate tax, etc.? Sales tax was a consideration in 1999, but legal and special reserves was not. What changed?

This similar scheme came before Iowa voters way back in June of 1999. There were two constitutional amendments to consider in 1999. Amendment 1 would have required the governor and general assembly to approve budgets for general fund expenditures that were no more than 99 percent of estimated revenues.

Amendment 2 would have required a three-fifths supermajority vote of all members of the state legislature to approve a bill that would increase income or sales taxes, or establish a new state tax. Voters rejected the measure with 52.0% voting no. The vote was held in the summer when proponents thought teachers, union members, government workers, and other voters who normally vote with the Democratic Party would be on vacation and miss the election. It didn’t work. The 1999 vote on Amendment 1 was much closer to passing (49.3% to 50.7%), but was defeated, as well.

Besides this year’s amendment reaching for two-thirds of a vote by both chambers rather than the 1999 version of three-fifths, there is also an ominous phrase in the middle of the proposal that requires voters to be knowledgeable of current law regulating credit unions.

Iowa attorney and former Legislative Fiscal Bureau analyst Jon Neiderbach explained that “Iowa has a moneys and credit tax on the legal and special reserves a credit union is required to maintain. The credit union pays this tax to the Iowa Department of Revenue.
There are a number of credits that reduce this tax. Federally-chartered CUs and State chartered CUs that convert to federally chartered CUs do not pay this state tax.” A federally-chartered CU is one that crosses state lines.

Legal reserves are funds required to be set aside as a safety net for an institution, serving as a safeguard against a future unforeseen calamity. Iowa banks are required to maintain
legal reserves as mandated by federal regulations, but there is no specific requirement for special reserves. The management of reserves is primarily governed by the bank’s policies and the applicable laws. Banks are immune from the proposed amendment.

“A special reserve is set aside for a ‘special’ purpose and can be only used for that purpose in the future.” So, when was the last time a tax rate was imposed or increased on a credit union? Currently, Iowa law requires one-half cent on a dollar. And according to Niederbach, “total revenues from this tax are significant (most recently it was $2.8 million in FY 2020).”

Most Iowans belong to a state-chartered credit union. According to the Iowa Credit Unions Online, there are over seventy-two credit unions in Iowa.

Similarly, Iowa does not require community associations to conduct reserve studies or to fund reserves at any particular level. Will this constitutional amendment affect HOAs,
condominiums, or other community boards if a law is enacted to secure special reserves for those entities? Yes!

There are other provisions in the Iowa Constitution that require a two-thirds supermajority. Calling a special session by the legislature requires a two-thirds
vote of each chamber. It requires a two thirds vote of each chamber to override
a governor’s veto. Impeachment requires a supermajority vote of both chambers as well as appropriating extra compensation for local or private purposes, whatever that means.

Section Twelve of Article VII (Corporations) requires a “vote of two thirds of each branch of the general assembly” when amending or repealing “all laws for the organization or creation of corporations, or granting of special or exclusive privileges or immunities.” To
my knowledge, this provision has never been used nor challenged in court.

According to the Iowa Department of Revenue, Iowa’s tax rates have not increased since the 1970s. Contrarily, rates have decreased in 1987, 1996, 1999, 2019, and 2023.

To answer the question of whether this constitutional amendment is necessary, I’m voting “NO!”

—Marty Ryan is a recovering lobbyist.