Pro-growth tax reform cannot occur without prudent budgeting and spending restraint.
Iowa’s status as a national leader on tax policy would not be possible but for the less-heralded fact that Iowa is a national leader when it comes to conservative budgeting, as well. Sound budgeting is at the heart of all good public policy. Pro-growth tax reform cannot occur without prudent budgeting and spending restraint. Thanks to the wise priorities of both Governor Reynolds and the legislature, Iowa’s fiscal foundation is strong.
Even with the phased-in tax cuts and national economic uncertainty, Iowa’s budget has been generating substantial surpluses in recent years. During this past legislative session, the legislature enacted an $8.5 billion budget for fiscal year 2024, which only spends 88 percent of projected tax collections. Such restraint makes a bold statement, considering that the Iowa Code permits the legislature to spend up to 99 percent of projected revenue.
Additionally, 2024’s spending plans are only a slight increase from the $8.2 billion fiscal year 2023 budget. Meanwhile, Iowa’s reserve accounts (the Cash Reserve Fund and the Economic Emergency Fund) continue to be funded at their statutory limits, with a combined balance of over $961 million. Even while keeping spending growth restrained, the priorities of government are still being met, including increased funding for education.
Future tax reforms will have to be matched with the same fiscal discipline that Iowa has been demonstrating of late. Not only can it be easy for legislators to give into countless funding requests, but once they do, government will naturally begin to grow by leaps and bounds. It takes a vigilant effort to keep spending channeled to the core functions of government.
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