Guest opinion: Iowa's tax and budget fantasy world

Guest Opinion: Iowa’s tax-and-budget fantasy world

Dubuque Telegraph Herald

By Mike Owen, Deputy Director, Common Good Iowa

It might not be this year, or next, but Iowans in the near future will realize the destructive course set by Governor Kim Reynolds and the tax-cutting leadership of the Legislature.

For now, they can pretend all is well. Surpluses — built by a good economy bolstered by federal support and by underfunding key priorities for over a decade — mask the impacts of tax cuts passed in both 2022 and 2024. But the impacts are real:

• We’re blowing a long-term hole in the budget.

• We’re tipping our tax system even further in favor of the richest Iowans.

By the state’s own numbers, state revenues will be down by nearly $2 billion in Fiscal Year 2026, the equivalent of over 20 percent of the $8.9 billion budget passed this year.

And we’ll get to that point even faster than we would have with the 2022 tax bill, which was being phased in over several years. The 2024 change deepened and accelerated the cuts. Instead of phasing in a 3.9 percent flat-rate income tax in tax year 2026, we’ll have a 3.8 percent rate in tax year 2025.

As a result, lawmakers next year will be budgeting for FY 2026 with revenue reductions not previously projected to hit as deeply until FY 2028.

Both sets of tax cuts overwhelmingly benefit the wealthiest Iowans. In 2025, the latest bill gives only 14% of the new tax benefits to the bottom 65% of tax filers.

Yes, we still have surpluses — $2.4 billion in the coming year — which is not surprising when the economy is strong and lawmakers budgeted only 79 percent of available revenues. We chronically underfund investments in Iowans and our future.

Even without the impact of the tax cuts yet to be implemented, for example, Iowa has held per-pupil education spending growth at 2% on average for 14 years. That wouldn’t keep pace with costs in your household, and it doesn’t in schools or in the households of people who work in them, either.

Now, consider the additional pressure caused by funding a second — and unaccountable — school system through private-school vouchers, and you can see that a General Fund on pace to be reduced by over 20 percent will not be able to meet even its current commitments, let alone new ones.

Want better child care? Law enforcement? How about state parks that the state says already it cannot keep up?

Fantasize if you want, but there won’t be room. Tax cuts assure it. It’s math, and it’s common sense.

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Mike Owen is deputy director of Common Good Iowa. He may be reached at  mowen@commongoodiowa.org