As seen in the Des Moines Register March 21, 2010
From the beauty of our land to the down-to-earth people with good values and common sense, Iowa offers me what I want out of life.
We’re faced with some problems, though.
I’ve had the pleasure of having my oldest son in town on a visit in March. Unfortunately, he decided to leave Iowa upon his graduation from the University of Iowa a few years ago. Opportunity first led him to Alaska and then to Houston, where he now lives and works.
I hope opportunity leads him back to Iowa some day. Same goes for my daughter in North Carolina, and my son at Iowa State.
Does Iowa offer opportunity? Yes it does, but it could offer more.
We need more jobs in Iowa.
Our tax policies may be holding us back according to the Tax Foundation, a Washington D.C. think tank specializing in tax policy.
They produce the Tax Foundation’s State Business Tax Climate Index. The index ranks states on the basis of five facets of their overall tax systems, including corporate and individual income tax rates, sales tax, unemployment insurance, and property tax rates.
According to the Tax Foundation, Iowa ranks number 46. Our neighbor, South Dakota, has the most favorable tax climate for business in the country. Does tax policy affect employment?
Let’s compare. From 2000 to 2008, the number of full and part time jobs in South Dakota increased by 9.9% according to the U.S. Department of Commerce. In Iowa, these jobs only increased by 5.4 percent.
The rate of growth in business ownership is faster in South Dakota than Iowa this past decade. So is personal income.
The Tax Foundation offers insights as to why. Here are key findings from their research:
• Local and state taxes can have an adverse impact on employment.
• Corporate income tax rates have the greatest negative affect on job creation. (South Dakota has no personal or corporate income tax).
• High property tax rates are a major deterrent to new business start ups, because they are paid regardless of the businesses’ profitability.
The bottom three states on the Tax Foundation’s index in order are New Jersey (#50), New York, and California. What do they have in common? They’re bleeding jobs. Why? An unfavorable tax environment for business is a major reason.
The next governor of Iowa needs to get it right on this issue. I was able to reach one gubernatorial candidate prior to deadline. Bob Vander Plaats told me the number one issue he hears on the campaign trail from business owners concerns our high property tax rates. He would like to see property tax relief to spur economic development throughout the state. Even more, he’d like to get government out of the business of picking winners and losers by dangling carrots in the form of tax credits and incentives. He advocates a level playing field with lower personal and corporate income tax rates coupled with property tax relief. In other words, economic development without gimmicks.
Last year, the U.S. News and World Report rated Iowa the second worst state in the county in which to start a business (West Virginia finished last). They were critical of our high level of government interference in the guise of very high capital gains taxes, high corporate income taxes, and high unemployment taxes on wages.
It doesn’t have to be this way.
We have the best people in American living right here in Iowa. And yet we’re not realizing our full potential because of unsound economic policy. Iowa’s policy encourages business decisions on the basis of political forces as much as market forces.
There is more to economic development than tax policy. But in light of our current standing, tax relief is the place to start.