Gov. Kim Reynolds in her Condition of the State address outlined a pro-growth policy agenda. Gov. Reynolds stated “that the condition of our state is truly strong.” The reason for this is the fiscal conservative policies that Gov. Reynolds and the legislature have been following.
Iowa Senate Majority Leader Jack Whitver summed up the policy goals of the 2024 legislative session when he stated that the plan is to “cut taxes, control spending, reform government, and let Iowan’s be great.” This is the formula that is making Iowa strong.
As the legislative session gets underway, Iowa is in a strong financial position. This is a direct result of conservative budgeting. Iowa’s budget has been in surplus, ending fiscal year 2023 with a $1.83 billion surplus. Iowa’s reserve accounts are filled at their statutory maximums (over $900 million). The surpluses have also fueled an enormous growth in the Taxpayer Relief Fund. The Taxpayer Relief Fund has a current balance of $2.73 billion and this is projected to increase.
This means that Iowa is still collecting too much from taxpayers. “Let me be absolutely clear: the surplus does not mean that we aren’t spending enough; it means we’re still taking too much of Iowans’ hard-earned money,” stated Gov. Reynolds.
As a result, Gov. Reynolds is proposing to accelerate existing income tax rate reductions and even lower the flat tax. As of now, Iowa is in the process of phasing in a 3.9 percent flat tax by 2026. This year, Iowa’s top individual income tax rate will be lowered from 6 percent to 5.7 percent.
Gov. Reynolds is proposing to accelerate the rate reductions, which would fully implement a 3.65 percent flat tax this year. The rate would further be lowered to a flat 3.5 percent in 2025. This would amount to a $3.8 billion savings for taxpayers over the next five years.
This is a pro-growth tax plan that would benefit all taxpayers in Iowa. It is almost certain that the Senate and House will also have income tax reform plans. As an example, Sen. Whitver has stated that the goal of Senate Republicans is to not only get the rate as low as possible, but eventually eliminate the income tax.
Gov. Reynolds is also proposing further reforms to government. One result of the state government reform law was a review of all of Iowa’s 256 boards and commissions. The Boards and Commissions Review committee has recommended eliminating or consolidating 111 boards and commissions. Gov. Reynolds stated that this was the “first comprehensive boards and commissions review we’ve done in our 175 year history.” State government reform is an essential part of the fiscal conservative agenda, which is making government more accountable to the taxpayer.
Iowa has become the gold standard for state fiscal policy. Pro-growth tax reform, right sizing government, and conservative budgeting are the pillars of a successful economic policy.
Critics of Gov. Reynolds and the legislature argue that tax cuts are only going to the wealthy and vital services are being deprived. Further, these critics have argued that tax cuts will lead to fiscal Armageddon. Nothing could be further from the truth.
Gov. Reynolds and the legislature have continued to fund the priorities of government and spending has actually not decreased, rather it has not increased as fast as some would prefer. Gov. Reynolds understands that the state budget should not only honor the taxpayer but keep spending within the taxpayer’s ability to pay for government.
Plus, critics fail to recognize that the tax and spend model does not work. Our neighbors to the north in Minnesota, after spending an enormous surplus by increasing spending by 38% and increasing taxes, is confronted with a budget deficit. “Overspending leads to higher taxes, broken promises, and fewer opportunities,” stated Sen. Whitver.
Once again, Gov. Reynolds has outlined a pro-growth fiscal conservative agenda.