The Chicago Tribune editorial board had a lament about Illinois tax policy earlier this summer. They didn’t believe that Illinois was being negligent on tax policy, but “…that our Midwestern neighbors are at least practicing creative taxation thinking.” The editorial should be encouraging for Iowa policymakers. After all, Iowa is one of the states the Tribune points to as an example of a different approach to tax policy. But it should also serve as a warning against complacency. States compete for people, businesses, and investment, and the tax reforms that make Iowa competitive today will not necessarily keep Iowa competitive tomorrow.
Illinois is generally considered a progressive “Blue” state, known for its fiscal policy full of tax and spending increases. As a result, Illinois’s budget is in a fiscal crisis and people and businesses continue to flee the state. When it comes to fiscal policy, the Land of Lincoln is the direct opposite of Iowa.
The Tribune editorial noted that Illinois’s neighboring states are implementing income tax reforms. Wisconsin, with a Democrat governor and Republican majorities in the legislature, reduced rates for many middle-income earners in 2025. In Missouri, the top income tax rate has steadily been ticking down since 2017. Similarly, Indiana’s flat income tax rate has been reduced six times since 2014.
Regionally, Iowa has enacted the most significant income tax reforms of them all. Since 2018, Governor Kim Reynolds and the legislature have approved a series of reforms that culminated in a 3.8 percent flat income tax. Iowa helped lead what became known as the “state flat tax revolution,” transforming a progressive income tax with a top rate of nearly 9 percent into a flat tax of 3.8 percent, a reduction of nearly 60 percent.
While the Tribune editorial stops short of endorsing any of the tax policies in neighboring states, they are arguing that Illinois neighbors are actually moving in the right direction when it comes to tax policy. “Meanwhile, Illinois’ most prominent income tax proposals continue to point in the other direction: a surtax on income above $1 million or another attempt to replace the flat tax with graduated rates,” stated the editorial. One blessing from Illinois’s 2026 legislative session, according to the editorial, is that these two reforms did not advance, “but their supporters have hardly abandoned the ideas.”
The Chicago Tribune clearly understands that Illinois has a problem, and the tax and spending policy is failing both the taxpayers and the economy:
For generations, Illinois could rely on Chicago’s gravitational pull. Companies wanted to be here because this is where commerce happened. That advantage still matters, but we can no longer afford to assume people and businesses will stay regardless of policy choices and political climate. Chicago is still the economic capital of the Midwest, but in an era of fierce interstate competition, prestige alone can’t carry the day.
Further, the editorial argues that while Illinois continues to rely on its historical reputation as an economic center, neighboring states are increasingly competing for people and businesses by offering lower costs, fewer regulations, and less political dysfunction.
Finally, the Tribune closes by stating that “we applaud our neighbors’ willingness to experiment and refuse to settle for the way things have always been done. Competition is a good thing, especially if it inspires a little taxation ingenuity here at home.”
That same competitive pressure applies to Iowa. Iowa’s recent tax reforms have put the state in a much stronger position, but other states are not standing still. The lesson from Illinois is not simply that Iowa chose a better path; it is that states that fail to adapt can lose their competitive position.
In January, Governor Kim Reynolds will officially leave office as one of the greatest champions for Iowa taxpayers. However, Iowa policymakers cannot become complacent. Even without Governor Reynolds, future income tax reform should not be tabled.
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