“I’ll get right to the point: Iowa was doing DOGE (Department of Government Efficiency) before DOGE was a thing,” stated Gov. Kim Reynolds in her testimony before the House Oversight Committee and Government Reform. The Oversight Committee was hearing testimony on “rightsizing government.”
Reynolds was invited to provide testimony because Iowa is an example of a state that is successfully implementing fiscal conservative policies. Iowa is often overlooked, but under the leadership of Gov. Reynolds, the Hawkeye state has become a beacon for conservative policies.
This is especially true when it comes to fiscal conservatism. Prudent budgeting is at the heart of sound fiscal policy. By limiting spending, Gov. Reynolds and the legislature were able to make historic pro-growth tax reforms.
“In 2018, when I took office for my first full term, our tax structure was an uncompetitive mess. At 8.98 percent, our top income tax rate was one of the highest in the nation, as was our 12 percent corporate rate. Antiquated state policies made our tax code complex and hard to reform,” stated Gov. Reynolds.
Through a series of tax reforms, Iowa’s income tax was transformed from a high multi-rate progressive income tax to a low 3.8% flat tax. The corporate tax rate, which is currently at 7.1%, will continue to be reduced until it reaches a flat 5.5%. In addition, both the inheritance tax and taxes on retirement income were eliminated.
Iowa’s fiscal foundation has remained strong. For multiple years, the budget has been in surplus, the reserve accounts are full at their statutory level, and the Taxpayer Relief Fund has close to a $4 billion balance.
Gov. Reynolds has noted that for Fiscal Year 2024, Iowa’s “growth-oriented fiscal stewardship” budget will have a $2.05 billion surplus, $961.2 million in reserve funds, and $3.75 billion in the Taxpayer Relief Fund.
“But it’s not enough just to cut taxes. You have to make them sustainable, especially if you want to keep bringing them down. The growth they create helps, but you also have to keep spending in check,” stated Gov. Reynolds.
Conservative budgeting has also been combined with government reform in Iowa. Gov. Reynolds has implemented a series of major state government realignment measures that are reducing the size and scope of government.
As a result of these measures, Gov. Reynolds reduced or consolidated 21 executive branch agencies, consolidated or eliminated boards and commissions, eliminated 600 open positions, and found 4,700 acres of state-owned farmland to sell.
Gov. Reynolds and the legislature have also enacted regulatory reform measures. This was first initiated by an executive order issued by the governor, which directed a review of the regulatory code. The legislature has followed with further reforms to lessen the regulatory burden. In the first year, this resulted in the elimination of 1,200 regulations.
Other reform measures have also been implemented to make Iowa’s government more efficient, such as utilizing “new technology platforms.”
“Altogether, we’ve saved taxpayers $217 million in just eighteen months, surpassing our initial projections for the first four years. And our government isn’t just smaller; it’s better,” remarked Gov. Reynolds.
Reynolds has stressed that Iowa is far from finished with tax reform and she has stated that she would like to see the income tax eliminated. Building upon her efforts to reform state government, Gov. Reynolds signed an executive order creating a state DOGE, which will be tasked with looking for additional means for “reducing the cost of government, maximizing the return on taxpayer investment, and leveraging new technology at all levels – federal, state, and local.”
Iowa Senator Jason Schultz (R) offers a timely reminder and a rule for legislators: “Both Republicans and Democrats need to realize that tax policy is affected by spending. And when you start seeing spending creeping up … you can’t have good tax policy.”
Unfortunately, this lesson continues to be ignored at all levels of government. Minnesota, which had a $18.5 billion surplus, is now confronted with a $6 billion deficit, and this is after massive spending increases and $10 billion in tax and fee increases. Other progressive Democrat “Blue” states are suffering similar consequences for their devotion to the tax and spend policy agenda.
Spending drives taxation. This applies to income, sales, and property taxes. This is why fiscal rules or spending limitations are crucial policy tools. They help rein in spending and serve as taxpayer protections.
It all comes down to spending. Fiscal conservatism is at the heart of public policy. This is why the House Oversight and Government Reform Committee invited Gov. Reynolds to testify in order to share Iowa’s story on the national stage that fiscal conservatism works.
