As Congress works to renew the 2017 Tax Cuts and Jobs Act (TCJA) before it expires at the end of 2025, negotiations remain complicated by disagreements over spending cuts, budget scoring, and whether to package tax cuts with other policy priorities. Below is a summary of where things currently stand.
Iowa has made great strides in tax reform, but now that the income tax rate has been right-sized, the era of massive budget surpluses is likely over. Future tax cuts will require a disciplined approach to budgeting. One key strategy is reclaiming federalism by reducing Iowa’s reliance on federal funds, which often come with costly mandates and allow for little state control or input. This approach would make it easier for the state to identify savings and slow the growth of numerous programs.
Subheading 30-Second Summary: Iowa’s reliance on federal funds significantly impacts the state’s fiscal flexibility, often imposing restrictions and obligations that limit its ability to implement independent tax and budget policies. To address this challenge, Iowa must adopt two key legislative changes: creating a federal funds inventory and requiring agency guidance disclosure regarding federal funding. A comprehensive inventory of federal funds received by the state […]
On March 4, voters in 46 Iowa counties will go to the polls. In front of them there will be measures from 25 school boards, five city councils, and three county boards. Iowa law allows local governments to propose public measures for taxpayer approval in special elections, typically held in March and September.
If you go to the Iowa Judicial Branch’s website, you will see photos that accompany the various announcements of what is going on with Iowa’s court systems. One of the photos depicts a statue of Lady Justice-the allegorical personification of the administration of justice. She is depicted blindfolded and holding a balanced set of scales.
The imagery is powerful: Justice is supposed to be delivered without regard to who the parties are and with a presumption of neutrality in the process. The scales start off even and it is up to the parties to convince Lady Justice of the merit of their case—facts and law (and nothing else) persuading her to deliver justice.
Many cities are not content with the revenue provided to them by property taxes, sales taxes, and other revenue sources. As a result, they are seeking more dollars from other sources. A franchise fee in Iowa is a charge that cities can impose on providers of utilities and other municipal services (such as gas, electricity, water, cable, and mass transit) for using public property to deliver them. These fees are passed on to consumers as part of their utility bills.
If Iowa changes its tax code before Congress decides on federal tax rules, the state risks having unnecessary, redundant, or conflicting policies that could create complications and unintended consequences.
Embedding these protections will safeguard taxpayers from pressures by special interests demanding increased spending. The flat tax promotes economic growth, and the two-thirds requirement ensures fiscal restraint while maintaining Iowa’s competitive edge among states.
High inflation, national economic uncertainty, and slowing state revenue might lead some observers to assume state income tax reform will slow down. However, as legislatures reconvene across the nation, several have begun consideration of significant income tax reforms.
Governor Kim Reynolds recently delivered her Condition of the State Address, outlining her legislative priorities and emphasizing Iowa’s fiscal strength, achieved through conservative policies. “I can say, once again, that the condition of our state is strong,” she stated. This strength is especially evident in Iowa’s fiscal foundation, as the state ranks as the most fiscally conservative in the nation. This success reflects the conservative budget and tax policies enacted by Governor Reynolds and the legislature.
The “limits” placed on cities and counties by the recent property tax reform failed to address the direct cause of property tax increases: local government spending. Iowans are growing frustrated with high property taxes. In the last few election cycles, election officials from both political parties have remarked that a top concern that Iowans have shared consistently has been high […]
The average property tax increase for the 75 counties affected by valuation-based restrictions was still 7.6%. After the passage of a property tax reform law in 2023 (HF718), many local elected officials complained that the restrictions on property tax revenue growth limited their ability to provide for their residents. With some time having passed, available data show exactly how many […]
The flat tax represents a significant step toward a simpler, fairer, and more prosperous future, ensuring economic growth and stability for generations to come. In just a few weeks, Iowa will transition to a flat income tax, marking a significant change for the state. Beginning in January 2025, Iowans will experience the benefits of this reform, which allows them to […]
This article was published in the Telegraph Herald. The state’s notorious property taxes, are getting in the way of broader economic prosperity in Iowa and should be lowered for everyone instead of just a select group of economic development projects. Iowa’s elected officials constantly tell us that state and local governments need to offer economic development, tax abatements and other […]
This article was published in Governing. Iowa has helped prompt other states to adopt flat income tax rates. To bring down property taxes, the state has to address local government spending. Iowa’s emergence as the beacon of pro-growth income tax reform is no accident. It’s the result of disciplined budgeting and bold leadership under Gov. Kim Reynolds and forward-thinking lawmakers. […]
Income taxes are paid at the state level and are used for state government functions. Property taxes, on the other hand, are paid at the local level and used for local government functions. There is not a connection between the two types of taxes. In the complex world of taxation, blame for painful bills is tossed around like a scalding hot […]
This article was published in American Habits. The solution for true property tax relief remains simple: creating more accountability and curbing spending at the local level. In 1934, to provide property tax relief, Iowa levied the state’s first sales and income taxes. Iowa was struggling with the economic impact of the Great Depression, and a sales and income tax provided […]
To be fair, Nebraska’s policymakers have made good strides in tax policy in recent years, too. It’s just that Iowa has created an even better environment for opportunity in the Midwest.
This article was published in The Gazette. Spending drives taxation. A strict 2 percent property tax cap on the growth of property taxes would force local governments to restrain spending. Iowa has been successful at income tax reform because it has balanced prudent budgeting with pro-growth tax rate reductions. In addition to commonsensical conservative budgeting, Gov. Kim Reynolds also has […]
A total of 48 bonds were on the ballot across the state, and 20 passed, resulting in $623.8 million in new spending. Iowa taxpayers made their voices heard on the potential new $1.1 billion in spending proposed by local governments on November 5, 2024. Ballots in 59 counties, directly affecting 82.4% of the state’s population, included new spending that would […]
Seven counties will see a new tax next year to fund emergency management services, or ambulance. A dozen counties across Iowa asked voters on November 5, 2024, to approve a countywide emergency medical services property tax increase to fund ambulance services. Out of that dozen, five failed to reach the necessary 60% threshold to levy the new tax. Background Signed […]
Once ranked as one of the worst states (44th) for its tax climate, Iowa is becoming more competitive (20th) and will only improve as future reforms are implemented. The Tax Foundation has released its new State Tax Competitiveness Index, which replaces the previous State Business Tax Climate Index. This updated Index considers not only the business tax environment but also […]
Lowering property taxes is crucial for Iowa’s economic growth and competitiveness, but this will only happen if tax relief extends to ALL taxpayers. A common theme among legislators, regardless of party, is that high property taxes remain a recurring concern among their constituents. This issue is also prominent on the campaign trail. Recently, the Des Moines Register reported that a […]
In the case of Webster City and Hamilton County, the average increase in property tax dollars collected was significantly more than the increase in the rate. When discussing property taxes, local elected officials in Iowa often use variations of the phrase, “We kept the rate the same” or “We didn’t raise the rate.” They say this because it sounds good, […]
This article was published in the Telegraph Herald and The Gazette. Paring back unnecessary local expenditures and then capping property tax growth at 2% would save taxpayers $250 million a year. Governing magazine crowned Gov. Kim Reynolds among 2024’s leading public officials, lauding conservative reforms that slashed Iowa’s punishing 9% income tax to a lean 3.8% flat rate by 2025. […]
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