Common Good Iowa

Guest opinion: Iowa lawmakers: Our tax system is broken; let’s break it some more

April 14, 2024

The Gazette, Cedar Rapids, April 14, 2024

Forget the adage: “If it ain’t broke, don’t fix it.” In the Iowa Legislature, it’s different: “We broke it, so let’s break it some more, and then make sure nobody can fix it.”

That in short is the picture of tax-cut proposals gaining steam in Iowa.

Deep income-tax cuts passed in 2022 jeopardize 20% of the state General Fund supporting education, Medicaid, mental health, corrections, child care, water quality and public safety. Because the tax cuts are phasing in through 2026, Iowans haven’t yet seen their impacts — masking damage their proponents won’t admit.

Now lawmakers are debating another round of income-tax cuts that will hit harder, possibly as extreme as eliminating the individual income tax, which generated half of the state budget when the latest cuts started. It’s full speed to the bottom.

As if this were not bad enough, pending legislation would make the damage permanent and erode our ability to govern ourselves.

A Senate resolution, SJR 2004, would set up a constitutional amendment requiring income-tax rates to be the same for everyone regardless of income.

A House resolution, HJR 2006, would require two-thirds majorities to raise those rates, a hurdle nearly impossible to meet. As few as 17 senators or 34 representatives could block any income-tax increase.

Passage this legislative session would set up potential legislative votes again in 2025 or 2026 that could put these ideas on the ballot in 2026. Both deny Iowa voters and the legislators they elect the opportunity to make their own decisions under principles of democracy — one person-one vote and majority rule. They are bad ideas.

It is not enough to say, “Let the voters decide.” It is no less egregious for voters in 2026 to rip power from future voters and the people they elect than it is for legislators who are elected for two- and four-year terms.

And it should not be harder to clean up a mess than to make one.

The stakes are high. It is simply unquestionable that the current law now being implemented — let alone new proposals to accelerate and deepen tax cuts and even eliminate the income tax — will be disastrous for public services and tax fairness.

The Institute on Taxation and Economic Policy has identified the 10 states with the most unfair state and local tax systems. Six have no income tax, including neighboring South Dakota. Two have a flat-rate income tax, one of them is Illinois.

At 23rd worst, Iowa is no bright light here. Like many states, we tax our lowest earners at the highest rates, but as long as we kept our moderately graduated-rate income tax the prospect of hitting the bottom 10 has been unlikely. That’s because the income tax has partially offset the regressive nature of sales and property taxes that hit the poor hardest.

Instead of passing more tax cuts skewed to the wealthy — and rising on that list of most unfair tax systems — we could make targeted tax changes to expand opportunity for working families. One in 6 Iowa working households don’t make enough to get by without public supports. We could expand the Earned Income Tax Credit or create a meaningful, refundable Child Tax Credit to help them succeed.

Hopefully Iowans will realize the stakes before we see the full effects of these plans: families who can’t take their child to the doctor because they were cut off Medicaid, more crowded classrooms because school districts can’t hire more teachers, even dirtier water because there’s nobody to penalize polluters. Iowa can do better, but only with resources.

Promises of economic growth through tax cuts make Iowa merely a petri dish for another failed experiment passing off politics as economics. Kansas saw it in recent years, reversing radical tax cuts after five years of damage, still attempting to recover.

But the tax-slashers persist. Where is their courage of conviction? Are they so lacking in confidence that they need to pass new cuts before those already passed have taken effect, and lock their position in place with constitutional amendments?To disrespect democracy is to disrespect Iowans. That is fast becoming the legacy of the current legislative majority.

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Mike Owen is deputy director of Common Good Iowa.

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