Iowa is going to have 1.8 billion reasons for tax relief and President Biden might end up planting a kiss on Senator Joe Manchin. Keep reading to learn why…
Did you know the state of Iowa has a fund called the Taxpayer Relief Fund? It’s true, that’s the actual name. While we are fans of almost everything with “tax relief” in its name, that’s not even the best part. Right now, that Fund has a balance of $1.1 billion. But it gets better: by the end of the next fiscal year, the Taxpayer Relief Fund is projected to have an ending balance of $1.8 billion!
It’s important to note that dollars can only flow into the Taxpayer Relief Fund after the Cash Reserve Fund and Economic Emergency Fund (sometimes collectively referred to as Iowa’s “Rainy Day Funds”) have been statutorily filled. Both of those funds have met that requirement and hold a combined $800 million.
Several years of budgeting restraint and booming tax receipts have delivered large surpluses to Iowa, including this past year, when our General Fund finished with a $1.24 billion budget surplus. Governor Kim Reynolds and Republican legislative leaders are stating that tax reform will be a priority for the 2022 legislative session.
Lawmakers have yet to publicly release any tax reform proposals, but the large surplus presents a historic opportunity to return the money back to taxpayers through substantial and permanent rate reductions, rather than through a one-time credit or cash payout.
The legislature has a responsibility to return this money to the taxpayers—after all, it was their money to begin with, and the state took more than it needed. Any tax reform should ensure that all Iowans receive tax relief, instead of targeting it to certain classes of taxpayers.
In our competitive, global economy, tax rates matter. This year alone, Iowa was one of 15 states that passed income tax reforms. If Iowa’s leaders don’t continue to make progress in reducing our rates and making Iowa more competitive, other states will likely pass us by. Governor Reynolds and the Iowa legislature should carry on the good work they’ve begun and map out a path to continued rate reductions.
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Are you wondering why President Biden may plant a big smooch on Senator Joe Manchin? ITR Foundation Deputy Director Walt Rogers recently interviewed Dr. Ernie Goss, a professor of economics at Creighton University Heider College of Business. They covered many topics facing our economy today, including why the President should be indebted to Senator Manchin.
What are your thoughts on Biden’s Build Back Better plan?
“We will build back better by not having the Build Back better plan passed… We are in the best part of the best nation on the face of the earth. We compete. Our farmers, our manufacturers, we do it. And we want to be like Europe?”
“By the way, one day Biden is going to kiss Manchin, metaphorically speaking. Manchin saved his butt by getting rid of this BBB plan.”
Why do we have a supply chain issue?
“One is a lack of truck drivers; we have a significant truck driver shortage. Then we’re talking about international markets with Long Beach, New Orleans, other ports into the U.S., and that’s important to Iowa.”
What is causing inflation to increase?
“The number one driver is supply chain disruption, no doubt about that. But also increase in demand. We’ve got really strong demand out there.”
How is Iowa’s economy?
“The GDP right now in Iowa is back above pre-pandemic levels. Jobs are not. Iowa’s still down about 3% of the employed workers in the state, and that’s about the same as the rest of the U.S. So, this is a very strange time when you can recover fully in terms of GDP but not in terms of employment.”
Is the national debt a concern?
“The federal reserve buys the debt but there’s a limit to that. Ultimately all economists will agree you pay for it by three ways: Either higher taxes, higher interest rates, or higher inflation. Sign on for that and you may get all three in fact.”
Who is going to pay for Biden’s tax increases?
They will be “broader than he’s been telling people and anybody who voted for him and didn’t think this was likely, I don’t get it. All of us are going to be biting the bullet.”
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Senate Majority Leader Jack Whitver and Speaker of the House Pat Grassley both were talking tax cuts this week.
On Monday, Senator Whitver weighed in with his thoughts about what needs to happen to tax rates in Iowa, “With a record budget surplus, it’s time to continue providing more tax relief for Iowans and their families, and give that money back to them with real, permanent tax cuts.”
Just a day later, Speaker Grassley shared where his caucus wants to go, “I don’t think that there’s any elected Republican in our caucus that would say: ‘Oh, no we don’t want to work to get the state’s income tax as low as we can,’” Grassley says. “Obviously, the ultimate goal would be zero.”