DES MOINES — The changes to Iowa’s tax laws have the potential to be dramatic, impacting every Iowan who pays taxes for years to come.

Similarly, the changes could impact every function of state government because of what could be a reshaped state budget.

But what would it mean for Iowa taxpayers and businesses?

Republican state lawmakers, who hold agenda-making majorities in the Iowa House and Senate and occupy the governor’s office, are working on plans to overhaul the state’s tax code.

Two plans have emerged.

Both reduce income tax rates for Iowa workers. One also cuts taxes paid by Iowa businesses.

But within the plans are significant differences. The Senate plan, for example, goes much deeper with the tax cuts, thus providing more tax relief for Iowans and businesses, but also taking much more money out of the state budget.

Eventually the two plans will have to be merged into one.

The Senate introduced its plan and approved it this past week, in rapid fashion.

The House this past week began work on tax reform, choosing to work off a proposal introduced earlier in February by Gov. Kim Reynolds.

Here is how the plans compare.

IOWANS PAY LESS

Both plans will reduce the amount of taxes paid by Iowa workers.

Under the Senate plan, the number of income brackets would be reduced from nine to five, with the top bracket paying 6.3 percent, down from almost 9 percent.

The governor’s plan also reduces rates but does not change the income bracket structure.

So what does that mean for Iowa taxpayers?

Under the governor’s plan, by full implementation in 2023 Iowans making between $40,000 and $60,000 annually would pay roughly $200 less in taxes each year, a reduction of around 12 percent.

Under the Senate plan, Iowans in that range would pay roughly $600 less, a reduction of around 25 percent.

The estimates were compiled by the state budget department for both tax plans.

On the higher end of the income scale, Iowans who make between $100,000 and $125,000 would pay $365 less under the governor’s plan and $872 less under the Senate plan, according to the budget department projections.

In short, the Senate plan calls for bigger income tax cuts, meaning Iowa taxpayers would pay less under both plans, but less under the Senate plan than the governor’s.

But that comes at a cost to the state.

A BREAK FOR BUSINESSES

Perhaps the biggest difference between the two plans impacts taxes paid by Iowa businesses.

Reynolds’ plan does not include a reduction of the state’s corporate tax rate; the governor said the state budget cannot withstand the additional loss in revenue, and that further study of the state’s myriad tax incentive programs needs an in-depth study before business tax rates should be lowered.

Republican Senators do not think they need to wait. Their plan makes significant reductions to business taxes, lowering the top rate from 12 percent to 7 percent, and going from four tax brackets to two, taxed at 7 percent and 5.5 percent.

The changes would have a significant impact, reducing businesses’ tax burden by more than 50 percent, almost $265 million, according to the budget department estimates.

Businesses that make between a quarter-million and $1 million would receive the most significant savings from the Senate plan: an average reduction of more than $95,000, according to the projections.

Businesses that make more than $1 million would see a more modest reduction: just more than $5,000.

“This bill creates dramatic economic development and it says that we’re open for business,” said Randy Feenstra, a Republican state senator from Hull who oversaw the Senate plan. “We want to be a business-friendly state. We want to be bold. We want to grow.”

SMALLER STATE BUDGET

Both plans would mean tax relief for Iowa workers, and the Senate plan would also mean tax relief for Iowa businesses.

But that also means less money coming into the state budget.

And that reduction is vastly different in the two plans.

The governor’s plan anticipates state revenue will be reduced by $1 billion over the next six years.

The Senate plan would match that in one year.

Under the Senate plan, state revenues would be reduced by more than $4 billion over the next six years.

Republicans hope the revenue losses are not as significant as projected; they say economic growth as a result of the tax cuts could create some new revenue growth.

“Yes, this is bold,” Feenstra said. “Senators, we must be bold if we want to drive Iowa’s economy by creating higher wages, more jobs and more opportunities.”

The governor’s plan would trim state revenue by just more than $88 million in the state budget year that starts July 1 of this year, and gradually increase to a nearly $300 million reduction in the state budget year that begins July 1, 2022.

The Senate plan would cut state revenue by more than $200 million in the next state budget year, and increase annually to the point where it would reduce state revenue by more than $1 billion annually in the state budget years that start July 1 of 2021 and 2022.

Iowa’s entire state budget this year was just more than $7 billion.

Opponents of the plan, most prominently Democratic state lawmakers, fear such significant budget reductions would wreak havoc on the state’s finances and devastate the functions funded by state government.

“This is, in my opinion, the height of fiscal irresponsibility. Reducing the state of Iowa’s revenue by $1 billion will have a catastrophic consequence to public education, public safety, and managed health care,” said Matt McCoy, a Democratic state senator from Des Moines. “We are taking a drastic, dark and disastrous path.”

TURNING TWO PLANS INTO ONE

Before any of the aforementioned proposals become law, one plan must emerge from the Iowa Legislature and be signed by the governor.

Senate Republicans have already approved their plan.

House Republicans have chosen to work off the governor’s proposal, and have just begun that work.

Since it appears likely the plans will have differences — some of them significant — Republican leaders from the Senate, House and governor’s office eventually will have to work together to construct one compromise proposal. That final legislation could contain elements from both plans.

“We’re not going to preclude any topic at this point, I don’t think,” said Iowa House Speaker Linda Upmeyer, a Republican from Clear Lake. “The Senate sent a bill that they have an interest in doing and the governor has a bill. And we’re going to see what we can do to come up with something that’s just good for Iowans.”