Earlier this year, Iowa Republicans, led by Governor Kim Reynolds, passed the largest tax cut in the state’s history, cutting income taxes and corporate taxes, cuts that overwhelmingly benefit the wealthy:
The changes in Iowa’s tax code will end federal deductibility, create sales taxes on digital goods and services and reduce both individual and corporate income taxes.
A married couple with two children making $96,000 can expect to save $347, or 8 percent.
Tax filers whose adjusted gross income is more than $1 million per year will see a 19.4 percent savings — a savings of $24,636 on average.
As usual, Iowa Republicans claimed that the tax cut would actually generate additional tax revenues for the state, despite decades of history showing that never, ever happens:
Republicans insisted the legislation is fiscally sustainable and that Iowa’s economy is on sound footing that will generate additional growth of state revenues.
Now, a new state budget forecast has been released for Iowa, and predictably, it shows that state revenues are growing significantly slower than state incomes:
State budget experts say revenue projections for the current fiscal year are running slightly ahead of their October predictions, but the growth for the 2020 budget is expected to be considerably slower.
The three-member Revenue Estimating Conference says state income is up about 4.7 percent from the previous year but the group anticipates only a 1.7 percent increase in revenue for next year.
What does this mean for Iowa? There won’t be any additional funds to be spent on things like education:
The estimate for next year is important because the governor must base her 2020 budget on the estimate released Thursday. That means little money for increased education spending or pay increases.
This is truly unfortunate because Iowa has been busy cutting education funding to the state’s university system:
The University of Iowa and Iowa State University will shoulder most of the cuts, at around $11 million, which means tuition increases for students.
Now, can you guess the result? Yep, the students of Iowa get to pay for these corporate tax giveaways by going deeper in debt, or just not going to college at all.
State legislatures are decreasing funding to public universities and community colleges. In Iowa, for instance, state funding to the three public universities is now less than in the 2015 fiscal year. Mid-year budget cuts are expected this spring and there’s uncertainty about next year’s state funding.
“Lower-middle-class and working families don’t have big chunks of money sitting around to pay for their kids’ college education,” said Lampe, a Pleasantville High School social studies teacher.
“As costs go up, students are going to take out more loans — or not go to college at all.”
Contrast this with what is happening in the neighboring state of Minnesota:
Minnesota’s strong economy and an anticipated savings in health care costs are expected to leave the state with a $1.5 billion budget surplus for the next two years, a dramatic increase from a projection earlier this year.
The state’s economist and budget officials release forecasts twice a year, looking at state, national and even global economic trends. This new projection is $1.2 billion higher than the forecast in February.
Minnesota Management and Budget officials attributed the jump to increased income and business tax collections and lower spending, particularly on health care.
Minnesota has had a Democratic Governor, Mark Dayton, for the last eight years, and will continue to have a Democratic Governor for the next four years after Democrat Tim Walz won this year’s election. As was noted in the article, when Democrat Mark Dayton took office in 2011, replacing Republican Tim Pawlenty, who had been Governor from 2003-2011, the state’s situation wasn’t looking so good:
Budget numbers released Thursday “show a remarkable recovery from the financial shambles in which I took office eight years ago,” said outgoing Gov. Mark Dayton, who came into office facing a $6.2 billion deficit, drained reserves and late payments to public schools.
Much of this improvement can be attributed to policy decisions made by Democrat Mark Dayton, who pushed through a $2.1 billion tax increase (mostly on the wealthy), created free, statewide, all-day kindergarten, created a $1.9 billion dollar rainy day reserve for the State’s budget, increased education funding, added more school counselors and teachers, upgraded water treatment centers, expanded Medicaid, and secured funding for expansions of the Mayo Clinic in Rochester and the Mall of America in Minneapolis.
Now, the incoming Governor of Minnesota will be able to use the state’s budget surplus to help the people of Minnesota, and to continue the good governance that has been in place for the last eight years:
Incoming Gov. Tim Walz, a Democrat, will take over in January in a strong position to start working on some of his campaign vows, including boosting educational spending, expanding publicly funded health care and new money for transportation.
The people of Minnesota are learning that they are much better off with a Democrat as Governor. Voters in other states, like Iowa, might want to take note.