The CATO Institute’s 2024 Fiscal Policy Report Card on America’s Governors once again rated Iowa Gov. Kim Reynolds with the top ranking as the nation’s most fiscally conservative governor.
Chris Edwards, the Kilts Family Chair in Fiscal Studies at CATO, wrote that Reynolds “has been a lean budgeter and dedicated tax reformer since entering office in 2017.” The fiscal conservative policy record of Gov. Reynolds goes beyond prudent budgeting and pro-growth tax reform, but also measures to reform state government and reducing the regulatory burden. Gov. Reynolds is demonstrating that fiscal conservatism is working to make Iowa’s economy more competitive and to create more opportunities.
Iowa’s success story is a complete contrast to the failed tax and spend policies of neighboring Minnesota. Minnesota Gov. Tim Walz was ranked the lowest on CATO’s index. “His biennial budget in 2023 hiked spending 36 percent, and he has raised business taxes, payroll taxes, vehicle taxes, and individual income taxes. His F grade is well-deserved,” Edwards argues in referencing Gov. Walz’ fiscal record. Walz and the DFL legislature also spent an $18 billion surplus and enacted $10 billion in tax increases.
It is unfortunate that Iowa is too often overlooked, but this is starting to change. This year, Gov. Reynolds has not only received top honors from the CATO Institute, but the Tax Foundation awarded her their distinguished service award and Governing magazine named her a public official of the year.
The reason for these honors is that Gov. Reynolds is a conservative policy leader. “Governor Reynolds really lays out a very aggressive and bold and conservative agenda,” stated Iowa Senate Majority Leader Jack Whitver to Governing.
Gov. Reynolds has placed a priority on conservative budgeting, which is the foundation for the historic pro-growth tax reforms that have been implemented. “Iowa general fund spending has risen at just 2.3 percent annually since Reynolds took office,” wrote Edwards.
Iowa has led the nation in state-based income tax reform. Iowa once had some of the highest income tax rates in the nation. The top individual income tax rate was close to 9 percent and the corporate tax rate was 12 percent, which was the highest in the nation.
Starting in January 2025, Iowa will have a flat individual income tax of 3.8 percent and a corporate tax rate of 7.1 percent that is scheduled to be lowered until it reaches a flat 5.5 percent. Iowa’s 3.8 percent flat tax will be the sixth lowest income tax in the nation. Gov. Reynolds is not going to be complacent on tax reform either and she has stated that her ultimate goal is to eventually eliminate the income tax.
Gov. Reynolds is demonstrating to the nation how successful pro-growth tax reform should be implemented. It starts with conservative budgeting. As a result, Iowa’s budget has been in surplus, and the reserve accounts are full to their statutory maximum. Iowa’s Taxpayer Relief Fund has a balance of $3.7 billion.
As part of her fiscal conservative policy agenda, Gov. Reynolds started the process to reign in Iowa’s state government. Gov. Reynolds stated that “like any large organization, government is marked by bureaucracy’s natural tendency to grow. If that growth isn’t constantly checked and rechanneled toward its core function, it quickly takes on a life of its own.”
The governor’s government reform measure was the first major effort to reform state government in nearly 40 years. It reduced Iowa’s 37 cabinet level agencies down to 16 and it has made other reforms such as consolidating boards and commissions. In addition, Gov. Reynolds has also enacted a series of regulatory reform measures that are beginning to reduce the regulatory burden.
Gov. Reynolds is leading Iowa as a strong conservative.