Common Good Iowa

Danger ahead: Gutting education, health and safety with tax cuts

Posted on March 3, 2023 at 12:02 PM by Mike Owen

The road is closed, the bridge is out, and tax-cut-obsessed legislators are stepping on the gas. 

Already, Iowans started the year with daunting challenges. Iowa’s now-chronic disinvestment in higher education and underinvestment in PK-12 education, work supports and public safety are well-documented. Cut your commitments, add in the boost of federal COVID relief to the economy, and — sure enough — big surpluses show up. But it’s a temporary boost — one-time money that won’t support long-term revenue cuts.

If that weren’t enough, a bill in the state Senate points Iowa down its darkest path, a rocky, musty low road that is certain to gut our critical public services in Iowa. Senate Study Bill 1126 would accelerate tax cuts passed last year and eventually eliminate the state income tax. The bill is reckless and irresponsible.

Eliminating the income tax would shrink our General Fund by about half. This is a cut in services every bit as much as it is a cut in taxes. One goes hand in hand with the other.

pie chart illustration of income tax revenue and education spending in Iowa General FundThink of it this way: 56 percent of the General Fund budget pays for education. When you take away half of the revenues, how much comes out of the half of the budget spent on schools? How much comes out of the 27 percent for health and human services? Want parks? Child care? Public safety? A judicial system? Corrections? Enforcement of workplace safety and environmental protection?

Any time a politician talks “tax cuts,” think “service cuts.” Ask for specifics. If we don’t need the revenue, we must not need the service. They should have to identify what we’re going to give up. They never do. Iowans deserve the full picture.

We also know that the lost revenue is only part of the problem. This legislation takes away the only piece of our system that is based on ability to pay. It is objectively unfair, putting a greater responsibility to pay taxes on low-, moderate- and middle-income taxpayers. The rich and powerful will not pay their fair share.

The bill even includes corporate tax giveaways — often millions upon millions sent out of state — to big companies that should be paying their fair share, but instead benefit from big breaks and gaping loopholes in the tax laws that exist.

In fact, this plan follows the worst examples from other states in tax equity. The six states ranked worst — Washington, Texas, Florida, South Dakota, Nevada and Tennessee — have little or no income tax.[1] These are bad examples. We should avoid following them.

We were already on a precarious course. Implementing severe new tax cuts before the previous round had been fully implemented was reckless last year. And this bill would do it over again.

The irony here is that good revenues offered a chance for Iowa to pick up its game, to strive for great investments in our people and our public infrastructure from schools to public safety to parks and trails and sustainable development. 

We’re on the wrong road. Let’s pull over and check the GPS. The bridge is out.

[1] Institute on Taxation and Economic Policy, “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, 6th Edition.” October 2018.

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