Surplus nonsense with surplus rhetoric
Posted on October 9, 2023 at 8:00 AM by Sean Finn
Governor Reynolds’ recent announcement of a $1.83 billion surplus was accompanied by a promise to “return this surplus back to where it belongs – the people of Iowa.” But if you're like most Iowans, don’t count on it. Odds are, you’re not among the few who will receive any meaningful benefit from this wave of regressive tax policy.
Rather, over 60% of any further income tax cuts would go to the top 20% of earners in Iowa, skewing our tax system even further in favor of the rich. If the Governor and legislators accomplish elimination of the state income tax, the top 1% of earners in Iowa would get tax cuts of over $40,000 per year while the bottom 20% of earners would see an annual tax cut of just $18.
Just days before Reynolds’ surplus update came another tax announcement: The corporate income tax rate is dropping again in 2023 from 8.4% to 7.1%. Rather than asking corporations to pay their fair share, Republicans in the Iowa Legislature have opted to funnel more money their way. Considering that, in 2022, CEOs were paid a stunning 344 times as much as a typical worker, this tax break is severely misguided.
The tax-cut mantra at the Iowa Statehouse twists the reality that Iowa families are facing. While setting aside over $3 billion in a tax-cut slush fund instead of investing it in critical services that protect Iowans and enhance opportunity, lawmakers have put benefits for wealthy corporations and rich individuals first.
Remember that while scrambling to find child care, or to scrounge up groceries after losing SNAP benefits, or donating school supplies, or barely making ends meet while unemployed. Instead, the Reynolds administration has collected tax dollars and banked them for the wealthy.
Whenever a politician brags about slashing state revenue, tie it immediately to the service lost. What do they want to give away for that tax cut? There is no way around what they won't admit: Cuts of the magnitude passed and proposed will erode or gut the state General Fund — over 50% of which goes toward education. That doesn’t bode well for our schools, our lakes and rivers, our health, or our families.
Budgeting a temporary surplus just to cut taxes is really just a missed opportunity to invest in Iowa.
 March 2023 analysis by Institute on Taxation and Economic Policy.