Creative Commons, Jason Mrachina
Creative Commons, Jason Mrachina
Tax Reform

State of the State: Iowa

Iowa’s Terry Branstad, the nation’s longest-serving governor, delivered his 22nd Condition of the State address this month. Branstad touted Iowa’s continued economic recovery, noting unemployment has fallen to 3.4 percent, while family incomes have risen 18.3 percent since 2010.

The governor outlined what he called “a tight budget,” with more than $3.2 billion for K-12 education – a $145 million increase over last year. In order to maintain this level of funding, the governor called for a 20-year extension of a law which dedicates a portion of sales tax revenue to school infrastructure. The law is currently scheduled to expire in 2029.

If renewed, Branstad wants the law modified, in order to use a portion of the dedicated revenue stream for water quality improvement. Annual growth in revenue beyond $10 million would then fund Iowa’s water nutrient abatement programs.

Branstad hailed Iowa’s long-standing renewable energy investments, boasting that nearly a third of the state’s electricity is now derived from wind. He additionally lauded the state’s ethanol, biodiesel and solar industries. To fuel additional growth, the governor called for a “state bio-renewable tax credit.”

In the most recent edition of Rich States, Poor States, Iowa ranks in the middle of the pack – 25th in economic outlook. Iowa’s corporate income tax structure, with a top rate of 12 percent, unfortunately weighs down the state’s competitiveness. Additionally, Iowa is one of 20 states that have a death tax.

On the glass-full side, Iowa does many things right. It is a right-to-work state; and Iowa’s debt service, as a share of tax revenue, is the nation’s third-lowest. Corporate income tax reform, coupled with a repeal of Iowa’s inheritance tax, would further enhance the state’s economic competitiveness.


In Depth: Tax Reform

Mainstream economists, small business owners and taxpayers across the country understand that growth-oriented reforms mean increased opportunity for all. As demonstrated by the annual Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, sound tax and fiscal policies are critical to economic health, allowing businesses and households to flourish. A …

+ Tax Reform In Depth