Many regulations are counterproductive, short-circuiting legitimate economic activity and making our state less competitive.
Making Iowa’s economy more competitive and primed for growth continues to be a priority for Governor Kim Reynolds. Since assuming office, she has emphasized reform of Iowa’s tax code, lowering individual and corporate income tax rates. Governor Reynolds has also controlled the growth of government spending, following prudent budget policies. Low tax rates and limited spending are two crucial pillars of sound economic policy.
A third pillar — often forgotten — is reducing the regulatory burden. On this front, Governor Reynolds has issued an executive order that places a moratorium on new regulations and requires a review of existing rules. These are some of the exact reforms Iowans for Tax Relief Foundation have offered in the past. A reduction of the barriers of “red tape” will add to and amplify other reforms, moving Iowa toward a more-competitive economic climate.
Governor Reynolds announced her executive order during her latest Condition of the State address. The intent, she said, is to “begin the process of lifting this dead weight from our economy over the next four years.” The Mercatus Center at George Mason University provides a sense of how heavy that burden is, examining states’ regulatory regimes and finding that Iowa has the most regulations in the Plains Region.
Governor Reynolds explains, “Over time, Iowa’s Administrative Code has ballooned to more than 20,000 pages and 190,000 restrictive terms. Many of these rules are unnecessary. Some are actually counterproductive, short-circuiting legitimate economic activity and making our state less competitive.”
While not every regulation is undesirable, too many will stifle an economy. In that sense, regulations can be considered a hidden tax. James Broughel, a senior research fellow at the Mercatus Center, argues that “there is now considerable empirical evidence that the accumulation of regulations slows economic growth.”
Reynolds’s executive order halts the expansion of regulations. State agencies must also begin reviewing existing regulations to determine their relevance and economic impact to ensure that “existing rules — each and every one — are worth the economic cost,” as Governor Reynolds stated. “Only those that meet this standard will be reissued. The rest will be repealed. When it’s all said and done, Iowa will have a smaller, clearer, and more growth-friendly regulatory system.” Agencies have four years to complete the review process.
This initiative continues’ the governor’s program for regulatory reform. In 2020, Reynolds signed into law a historic occupational licensing reform, which allowed for universal recognition of out-of-state licenses, waived licensing fees for low-income individuals, and established a standard for a fairer process of review for licenses denied based on past criminal convictions. These measures are reducing barriers to employment and recognizing residents’ right to earn a living.
Governor Reynolds’s latest regulatory reform joins Iowa with a number of other states that have undergone or are undergoing some process of regulatory review. Former Arizona Governor Doug Ducey, for one, enacted a moratorium in 2015. During his administration, Arizona eliminated or simplified 3,047 regulations, saving taxpayers an estimated $169.1 million. The moratorium has since been codified in state law. Ohio has also been a leader in regulatory reform, with the legislature establishing a goal of 30 percent reduction in regulation by 2025. In addition, Ohio requires every new regulation to be offset by two repealed.
Beyond unshackling Iowans from the burden of unnecessary regulations, Governor Reynolds is proposing to rein in the administrative state that enforces them. Currently, Iowa has 37 cabinet-level agencies, and the governor is proposing to consolidate them to 16.
Pairing regulatory reform with pro-growth tax reform and intelligent spending, Iowa’s economy will continue to grow stronger and more competitive.