The Revenue Estimating Conference (REC), which is tasked with estimating revenue for the State of Iowa, met last week and continued to project healthy revenues for both Fiscal Years 2022 and 2023. “Six and a half months from now, there’s going to be a pretty significant ending balance and so I think the General Assembly and the governor are in a position to do some really good things for the taxpayers of Iowa,” stated Kraig Paulsen, who serves as the Director for both the Department of Management and the Department of Revenue, and chairs the REC.
Governor Reynolds and Republican legislative leaders have both said that income tax reform will be a priority for the 2022 legislative session. As a result of prudent budgeting and fiscal conservatism, Iowa’s budget has a $1.24 billion surplus, and the reserve accounts are filled up to their statutory limits. The Taxpayer Relief Fund, which is aptly named as it exists to deliver tax relief to Iowans, currently has a balance of over $1 billion and is expected to grow to nearly $2 billion by next summer.
Although no specific tax reform plans have been introduced yet, it does appear individual income taxes will be addressed. “We’re focused on the individual income tax rate in the Senate. We have been for five years. That’s where we’re seeing a lot of progress. That’s where we’re seeing a lot of economic growth because the individual income tax rate not only affects every individual person — every single taxpayer, but it also affects most of the businesses in this state,” noted Senate Majority Leader Jack Whitver.
Whitver’s colleague across the Capitol Rotunda, Speaker of the House Pat Grassley, offered similar comments, “This overcollection is the people of Iowa’s money, and they deserve it back. Particularly as we are facing rising levels of inflation from the Biden economy, we must ensure Iowans keep more of their hard-earned money. Iowa House Republicans look forward to addressing this issue and finding the most effective way to lower taxes and return this money to Iowa taxpayers.”
Tax rates matter not only because high taxes deprive both individuals and businesses of their hard-earned income, but they also discourage growth and productivity. Low tax rates are a vital component of economic growth. If Iowa wants a stronger and more competitive economy, then our elected officials must continue their work on lowering high tax rates.
In addition to economic competition, states are also competing for people. Even before the pandemic, growing our population and expanding our workforce were major economic goals for Iowa. The results from the 2020 Census demonstrate that more people are voting with their feet and the evidence is clear that an exodus is occurring in high tax states. As workplaces become more flexible and technology allows for remote connections, there will only be more opportunities for people to relocate and taxes are proving to have an impact on those decisions.