• About Us
  • Advertise
  • Contact Us
  • Privacy Policy
Sunday, January 29, 2023
The Iowa Torch
  • Home
  • State Government
  • Federal Government
  • Local Government
  • Politics
  • Education
  • Opinion
No Result
View All Result
  • Home
  • State Government
  • Federal Government
  • Local Government
  • Politics
  • Education
  • Opinion
The Iowa Torch
The Iowa Torch
No Result
View All Result
Home Opinion

Hendrickson and Ginn: Iowa, Beware of Tax Rate Complacency

John Hendrickson and Vance Ginn: Iowa can look to states such as Texas, Indiana, North Carolina, among others creating pro-growth tax codes and practicing fiscal restraint.

John HendricksonVance GinnbyJohn HendricksonandVance Ginn
March 30, 2021
in Opinion
Reading Time: 4 mins read

Toyota Financial Services recently announced that as a result of consolidating customer service centers, the Cedar Rapids facility will close and cut 600 jobs, due in part to the private sector employing 5 percent fewer people than a year ago. The consolidation of customer service centers is a loss for Iowa and a win for other states, such as Texas. Businesses are responding to both economic climates and the new work environment brought about by the COVID-19 pandemic. 

RELATED POSTS

Hendrickson & Williams: To achieve meaningful property tax relief, right size government 

Reynolds: An open letter to Iowans about school choice

Miller-Meeks: Improving American healthcare

States with high tax rates are seeing an exodus of both people and businesses while those with lower rates are seeing them arrive in droves. This is yet another example of how people vote with their feet when the burden of government becomes excessive.

Iowa has made progress in recent years by lowering the individual and corporate income tax rates, but policymakers should beware of becoming too complacent, and they should work to continue reining in spending and lowering rates to attract people and businesses. 

Many states have or are gradually lowering their personal and corporate income tax rates. This happened at the federal level during the Trump administration and many people had tangible prosperity that they’d never experienced. But the Biden administration may soon reverse those gains if progressives in D.C. have their way, which makes more competitive tax systems in Iowa and other states essential.

Legislatures in Arizona, Mississippi, and West Virginia are currently considering bills to phase-out their state income tax. For Iowa to remain economically competitive, it must follow suit. Iowa’s tax rates matter because we are in direct competition with 49 other states for businesses, jobs, and people. For example, South Dakota, Iowa’s neighbor, does not tax individual or corporate income, making it far more economically competitive.

Texas, another no-personal-income tax state, is a national leader in terms of economic growth and attracting both people and businesses. Iowa could also learn from Texas’s recent property tax reform in 2019, which limited growth in property taxes without voter approval to 3.5 percent for local governments and to 2.5 percent for school districts. They are even considering improving their tax system by eliminating nearly half of their property taxes.

Higher tax rates not only deter economic growth, but they also penalize hard-working individuals, families, and businesses. Taxes on income are considered the most harmful of taxes as they discourage productivity, hiring, and investing in Iowa.

In 2018, Governor Kim Reynolds and the Republican-led legislature passed pro-growth tax reform that lowered income tax rates and broadened the sales tax base. Reducing tax rates and practicing responsible spending policies is making Iowa more competitive and economically strong.

As a result of the 2018 law, this year Iowa’s corporate tax rate fell from 12 percent, the highest in the nation, to 9.8 percent—matching Minnesota’s. Even at 9.8 percent Iowa still has the third-highest corporate tax rate in the nation. 

In 2023, the income tax is scheduled to be reduced to 6.5 percent—making it more competitive in the region. The caveat is, for the rate reduction to occur, it must meet two stringent revenue triggers. 

First, state revenues must surpass $8.3 billion. Second, revenue growth must be at least 4 percent during that fiscal year. The use of revenue triggers in state tax policy can be a good idea but creating a high threshold can unnecessarily delay tax rate reductions and reduce the necessary restraint on government spending—the driver of higher tax burdens. 

ADVERTISEMENT

Lowering income taxes should not be hindered by the 4 percent growth trigger, so repealing it to use any revenue above $8.3 billion for cutting the income tax would reduce a major roadblock to tax relief and provide taxpayers with more certainty they can use to plan for their more prosperous futures.

Gov. Reynolds continues to stress the importance of making Iowa’s tax code more competitive. The Iowa Senate has passed legislation that will repeal both revenue triggers and phase-out the obsolete inheritance tax. Both measures would place taxpayers first and make the state’s tax code more competitive. 

Iowa can look to states such as Texas, Indiana, North Carolina, among others that are creating pro-growth tax codes and practicing fiscal restraint. To be an economic leader in the Midwest—and to let people prosper—Iowa cannot afford to become complacent. 

Tags: 2021 Iowa Legislative Session89th General Assemblyfiscal responsibilityIowa tax policyKim Reynolds
ShareTweetShare
ADVERTISEMENT
Previous Post

Iowa House Unanimously Passes Parental Rights Bill

Next Post

Reynolds Declares April 1st as Statewide Day of Prayer

John Hendrickson

John Hendrickson

John Hendrickson is the Policy Director for TEF Iowa.

Vance Ginn

Vance Ginn

Vance Ginn, Ph.D., is the chief economist with the Texas Public Policy Foundation based in Austin, Texas. He is the former chief economist of the White House’s Office of Management and Budget (OMB) during the Trump administration.

Related Posts

Reynolds signs bill creating education savings accounts
State Government

Reynolds signs bill creating education savings accounts

January 24, 2023
Study: $1,702 Collected in Property Taxes Per Capita in Iowa
Opinion

Hendrickson & Williams: To achieve meaningful property tax relief, right size government 

January 24, 2023
Reynolds Signs Charter School Expansion Bill Into Law
Opinion

Reynolds: An open letter to Iowans about school choice

January 23, 2023
The Iowa House Education Reform Committee debating HSB 1 on January 18, 2023.
State Government

School choice bill advances through legislative committees

January 19, 2023
Iowa National Guard’s top general announces retirement
State Government

Iowa National Guard’s top general announces retirement

January 19, 2023
Holt: Education, Free Speech & Justice for All
Opinion

Holt: It’s time to empower parents through school choice

January 12, 2023
Next Post
Reynolds Declares April 1st as Statewide Day of Prayer

Reynolds Declares April 1st as Statewide Day of Prayer

Des Moines Public Works Reports Being Under Budget for Snow Removal

Des Moines Public Works Reports Being Under Budget for Snow Removal

Sign-Up For Our Daily Updates

Get The Iowa Torch right in your inbox!

Please wait...

Thank you for signing up!

Recommended Articles

Ernst Expresses Concern About Trump’s Upcoming Senate Impeachment Trial

Ernst: Only In Washington, DC Does The Word ‘Trillion’ Get Thrown Around Often and Easily

July 26, 2021
State Auditor Calls for Targeted Spending for COVID-19 Relief

State Auditor: Iowa’s Medicaid Privatization Increases Illegal Denials of Care

October 21, 2021

Iowa House Bill Requiring Informed Consent for Medical Abortion Advances

February 3, 2021

Popular Stories

  • Reynolds signs bill creating education savings accounts

    Reynolds signs bill creating education savings accounts

    0 shares
    Share 0 Tweet 0
  • Miller-Meeks: Improving American healthcare

    0 shares
    Share 0 Tweet 0
  • Local Rap Artist’s Non-Profit Receives Grant to Help At-Risk Youth Graduate

    0 shares
    Share 0 Tweet 0
  • Iowa House Republicans outline priorities with first 13 bills

    0 shares
    Share 0 Tweet 0
  • Iowa Senate Passes Governor’s School Choice Bill

    0 shares
    Share 0 Tweet 0

The Iowa Torch

The Iowa Torch​ is a for-profit, news organization that focuses on political news as it relates to Iowans

Categories

  • Education
  • Federal Government
  • Iowa History
  • Local Government
  • News
  • Opinion
  • Politics
  • State Government
  • Uncategorized
  • Uncategorized

Newsletter

Please wait...

Thank you for signing up!

© 2022 The Iowa Torch, a publication of 4:15 Communications, LLC.

No Result
View All Result
  • Home
  • About Us
  • Advertise
  • Contact Us
  • State Government
  • Federal Government
  • Local Government
  • Politics
  • Education
  • Opinion

© 2022 The Iowa Torch, a publication of 4:15 Communications, LLC.