• About Us
  • Advertise
  • Contact Us
  • Privacy Policy
Tuesday, February 7, 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: After passing historic tax reform in Iowa, the sky is not falling

John Hendrickson: Iowa’s state government is still growing even with the tax cuts. It just is not growing as fast as some special interests and progressives would favor.

John HendricksonbyJohn Hendrickson
March 22, 2022
in Opinion
Reading Time: 3 mins read
Group Pushes for Tax Cuts with Iowa’s Projected Revenue Growth

Let’s make something clear right away: Iowa’s state budget is going to continue to grow in the coming years.

RELATED POSTS

Hendrickson: Placing Iowa’s income tax on the road to elimination

Ingstad & Hendrickson: Iowa education reforms point to what’s next

Ernst: Investigation proves group that funneled tax dollars into Chinese labs can’t be trusted.

The only reason that point may be in question is Iowa’s Revenue Estimating Conference (REC), which has the difficult responsibility of estimating revenue for the state, recently released updated projections. The REC increased the current fiscal year (2022) estimate by 4.2 percent to $9.171 billion, while the FY 2023 estimate was lowered slightly by $14.8 million to $9.156 billion. That projected reduction in state revenues isn’t because of a faltering economy, though. It’s the result of the first wave of tax cuts that will be delivered from this year’s historic tax reform package.

And of course, that’s how tax cuts work.  The whole idea is the taxpayer gets to hold onto more of their hard-earned dollars while government gets a little less. Iowa can afford to bring in fewer dollars because our state budget has been running at a substantial surplus for several years now: 

ADVERTISEMENT
  • 2020 closed with a $300 million surplus.  
  • 2021 closed with a $1.24 billion surplus.
  • 2022 is projected to close with a $1.29 billion surplus.

Those surpluses have been accumulating with the state’s cash reserves, at nearly $1 billion, at their statutory limit.  This structural imbalance in how Iowa collects revenue is precisely the reason why a major tax reform package was so sorely needed.  Even with a growing budget in 2023, and with tax cuts occurring, the REC is still projecting that the surplus for Fiscal Year 2023 will be $975.8 million.

Immediately after the conclusion of the REC meeting many media outlets and progressives began to panic that the tax reform measure is eating away too much revenue and could potentially result in a budget crisis.  Digging into the numbers beyond the headline show nothing is further from the truth, though.

The REC is required to account for any legislative action, which so far this year includes the major tax law changes. The new tax law is estimated to reduce Iowa’s General Fund revenue by $236.3 million in 2023, but the overall revenue estimate only declined by a small fraction of that amount, meaning a growing economy will keep boosting the state’s bottom line.   Kraig Paulsen, Director of the Department of Management and the Department of Revenue, and a member of the REC, stated that Iowa is in “an extremely, extremely strong financial position.” Although members of the REC did address economic uncertainties such as the historic inflation and the war in Ukraine, the panel was still optimistic overall. 

Director Paulsen also does not foresee any future budget cuts because of reduced revenues. Revenues are still growing even with the tax rate reductions. “I don’t foresee cuts to any services… In the foreseeable future, no, I really don’t see any of those problems,” noted Director Paulsen.

Some who are predicting that the sky will fall because of this year’s tax reforms were also making the same argument after tax reforms passed in 2018 and in 2021. The sky did not fall, and Iowa’s economy was able to withstand both a pandemic and severe weather events. This is why fiscal conservatism is so important. Governor Reynolds and the legislature have balanced prudent tax reform with controlled spending growth so the state wasn’t left spending beyond its means.

But even if events outside the control of our state’s leaders end up having a negative impact on our economy, Iowa will still have over $2 billion in the Taxpayer Relief Fund as a result of the ongoing budget surpluses.  This Fund can provide a cushion to protect the budget or even serve as a catalyst for more tax cuts in the future.  Commenting on the REC estimate Senate Majority Leader Jack Whitver stated “that even in the midst of global economic challenges, Iowa is in a strong fiscal position. Reserve accounts are full, the taxpayer trust fund will have nearly $2 billion, and the economy is growing. The tax relief bill is sustainable, the budget is balanced, and Iowa is on the right track,” noted Senator Whitver.

At the end of the day, Iowa’s state government is still growing even with the tax cuts. It just is not growing as fast as some special interests and progressives would favor. Iowans should not be deterred by the “cry wolf” arguments that the sky will fall as a result of the historic tax reform law.  Delivering tax cuts while the state continues to grow its budget is a win-win for Iowa.  Iowa

Tags: 2022 Iowa Legislative Session89th General AssemblyIowa state budgetIowa tax policyJack WhitverKraig PaulsenRevenue Estimating Conferencetax cutstax reform
ShareTweetShare
ADVERTISEMENT
Previous Post

Iowa House passes bills increasing access to mental health

Next Post

Reynolds, Iowa Dept. of Education award over $500K to grow computer science teacher workforce

John Hendrickson

John Hendrickson

John Hendrickson is the Policy Director for TEF Iowa.

Related Posts

Hendrickson: Fiscal Conservatism Works
Opinion

Hendrickson: Placing Iowa’s income tax on the road to elimination

February 6, 2023
Reynolds outlines agenda in Condition of the State address
State Government

Reynolds outlines agenda in Condition of the State address

January 11, 2023
Group Pushes for Tax Cuts with Iowa’s Projected Revenue Growth
State Government

Iowa Legislature gavels in 90th General Assembly, highlights priorities

January 9, 2023
Politics

Reynolds, legislative leaders decline participation in preview forum

January 4, 2023
Whitver Announces Iowa Senate Committee Chairs, Vice Chairs
State Government

Iowa Senate committee chairs for 90th General Assembly announced

November 18, 2022
Schultz: Governor Highlights Successes in Western Iowa
Opinion

Hendrickson: Governor Kim Reynolds has a mandate

November 15, 2022
Next Post
student computer lab computer science

Reynolds, Iowa Dept. of Education award over $500K to grow computer science teacher workforce

Hendrickson: Fiscal Conservatism Should Guide 2021 Legislature

Iowa Legislature passes bill switching business property tax credits to exemptions

Sign-Up For Our Daily Updates

Get The Iowa Torch right in your inbox!

Please wait...

Thank you for signing up!

Recommended Articles

National Museum of China by Shuaizhi Tian.

Hendrickson: What would Hamilton say about China?

April 20, 2022
Two Staff Dead After Assault at Anamosa State Penitentiary

Two Staff Dead After Assault at Anamosa State Penitentiary

March 23, 2021

Iowa House Bill Requiring Informed Consent for Medical Abortion Advances

February 3, 2021

Popular Stories

  • Hendrickson: Fiscal Conservatism Works

    Hendrickson: Placing Iowa’s income tax on the road to elimination

    0 shares
    Share 0 Tweet 0
  • Ingstad & Hendrickson: Iowa education reforms point to what’s next

    0 shares
    Share 0 Tweet 0
  • State of Iowa invites feedback about where to spend broadband funding

    0 shares
    Share 0 Tweet 0
  • Ernst: Investigation proves group that funneled tax dollars into Chinese labs can’t be trusted.

    0 shares
    Share 0 Tweet 0
  • Iowa Dept. of Revenue Releases 2022 Individual Tax Brackets, Interest Rates, and Deductions

    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.