Mission accomplished — no cuts needed

What if Iowa promoted our low business taxes, rather than run us down?

Tax-cutters are in hog heaven in Iowa these days. They soon assume the levers of power at the State Capitol and they are planning to use them — no matter the consequences.

But if they truly believed their own mantra about the economic glories of low taxes, they would be shouting “Mission Accomplished” from the top of the Capitol dome. For all their talk of making Iowa “competitive,” they would realize we are already there, and have been for many, many years.

Once again, the national accounting firm Ernst & Young has examined the range of state and local taxes affecting businesses in every state plus Washington, D.C., and found Iowa is in the same place it always lands — the middle of the pack.

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Twenty-three states and D.C. tax business more heavily than Iowa, which is tied for 25th with six other states including neighboring Minnesota. Even South Dakota, despite a low-tax image trumpeted by western Iowa politicians, is slightly higher than Iowa.

That is because responsible tax policy demands a comprehensive look at the impact of all pieces of the tax structure, as Ernst & Young does. Cherry picking only one tax that appears high — appears being the key word because this can be complex — ignores other offsets in the tax code.

Yet, the post-election rhetoric has been a lot about tax cuts — tax cuts we cannot afford.

To the extent state and local taxes matter in business decisions — and there is considerable evidence that they do not, despite the political spin — Iowa already is well-situated. In other words, the concept of “competitiveness” can be overstated easily. A tax structure would have to be markedly different from others, producing high-tax results that we certainly don’t see in Iowa, to make a difference in business expansion and location decisions.

As we pointed out in 2014, Iowa is a low-tax state. This remains so. Why aren’t our elected officials promoting that if it is so important to them?

Having already implemented what the Governor promoted as the largest tax cut in Iowa history with massive property tax giveaways benefiting big-box retailers in 2013, and recognizing state revenues are coming in more slowly than expected, our leaders need to take a deep breath.

We cannot afford new tax cuts for business. For stronger economic growth, let’s turn the page and look at things that matter.

owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
mikeowen@iowapolicyproject.org

Author: iowapolicypoints

The Iowa Policy Project is a nonprofit, nonpartisan organization that provides research and analysis to engage Iowans in state policy decisions. We focus on tax and busget issues, the Iowa economy, and energy and environmental policy. By providing a foundation of fact-based, objective research and engaging the public in an informed discussion of policy alternatives, IPP advances effective, accountable and fair government.

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