Governor Kim Reynolds Is a Champion of Fiscal Conservatism
President Calvin Coolidge regarded “a good budget as among the most noblest monuments of virtue.” For Coolidge, fiscal conservatism or “economy in government” was a moral issue. Governor Kim Reynolds reflects not only the spirit of Coolidge, but just as with Coolidge, she is a true champion of fiscal conservatism. Governor Reynolds and the legislature have placed a priority on conservative budgeting. Prudent budgeting has resulted in multiple rounds of surpluses and with the end of fiscal year 2023, Iowa will have a $1.83 billion surplus.
As a result of fiscal conservatism Iowa’s economy and fiscal foundation is strong. In addition to the $1.83 billion fiscal year 2023 surplus, Iowa’s reserve accounts will have a balance of $902 million, and the Taxpayer Relief Fund will have $2.74 billion.
Conservative budgeting is at the heart of fiscal conservatism. During this past legislative session, the legislature enacted a $8.5 billion budget for fiscal year 2024, which only spends 88 percent of projected tax collections. This was only a slight increase from the $8.2 billion fiscal year 2023 budget. Further, the priorities of government are being met, including funding for public education.
Governor Reynolds is also placing a priority on lowering income taxes. Since 2018, the Governor and the legislature have been lowering both individual and corporate income tax rates. In 2022, Governor Reynolds signed into law not only the largest income tax cut in state history, but it was also the most comprehensive tax reform measure in the nation. Iowa’s nine-bracket progressive income tax is being phased out until a flat 3.9 percent rate is achieved in 2026.
Another part of the 2022 tax reform law was implementing a revenue trigger to lower the corporate tax rate. As a result of strong corporate tax revenues the rate will be lowered from 8.4 percent to 7.1 percent starting in 2024. This provides further evidence of the strength of Iowa’s economy because the 7.1 percent rate was projected to occur in 2027. The corporate rate will continue to be reduced until it reaches 5.5 percent.
All of this is made possible as a result of conservative budgeting. What too many people overlook is that significant tax cuts like Iowa’s are only made possible by years of prudent and conservative budgeting. Without spending restraint, any tax relief, regardless of the tax, becomes impossible.
Conservative budgeting has also led to other limited government policies. This past session the legislature passed Governor Reynolds state government reorganization reform measure. This new law is the first major effort to reform state government in nearly 40 years. Prior to the enactment of this law Iowa had 37 executive branch cabinet agencies — more than all neighboring states, including our larger neighbors Minnesota and Illinois. Iowa now has 16 cabinet agencies.
This has also led to a recommendation from the Boards and Commissions Review Committee to eliminate or consolidate 111 boards and commissions in Iowa, which would mean a 43 percent reduction in Iowa’s boards and commissions. Governor Reynolds is reigning in Iowa’s administrative state and establishing more accountability and oversight over Iowa’s unelected fourth branch of government.
Iowa’s strong fiscal foundation will provide the foundation for more pro-growth policies in the 2024 legislative session. “We’ve seen what the powerful combination of growth-oriented policies and fiscal restraint can create, and now it’s time for Iowans to directly receive the benefits. I look forward to cutting taxes again next legislative session and returning this surplus back to where it belongs – the people of Iowa,” stated Governor Reynolds.
Governor Reynolds and legislative leaders are looking to further lower the income tax rate and even place it on a path toward elimination. Iowa has the opportunity to not only achieve the lowest flat tax in the nation, but also be the first state to eliminate the income tax.
Iowa is demonstrating that fiscal conservatism works.
John Hendrickson is policy director of Iowans for Tax Relief Foundation
