Iowa Gov. Kim Reynolds and the Republican-led legislature have mainly been following fiscal conservative principles of limiting spending and reducing tax rates. Gov. Reynolds even received an “A” grade from Cato Institute’s 2020 Fiscal Policy Report Card on America’s Governors for her fiscal conservatism.

As a result of conservative budgeting practices, Iowa’s fiscal house was not only prepared for the economic emergency caused by the COVID-19 pandemic, but it remains in strong condition. Iowa’s budget has a $305 million surplus, and over $770 million in reserves.

Still, there is room for improvement.

Families across Iowa, whether in good or bad economic times, practice priority-based budgeting. Families must make decisions, often difficult ones, on how best to spend their hard-earned dollars. The same is true for small business owners across Iowa who must prioritize their spending to not only keep their doors open but meet payroll and provide for themselves.

As households across Iowa prioritize spending, governments should do the same, and even more so given it’s not their money. This results in a sound reason for government to practice priority-based budgeting or zero-based budgeting, whereby legislators take a close look at how every taxpayer dollar is spent.

Gov. Reynolds has proposed an $8.1 billion budget for Fiscal Year 2022. Although this increase from the $7.77 billion FY 2021 budget does not seem like much, this growth is more than the average taxpayer’s ability to pay, as appropriately measured by population growth plus inflation.

This would compound the higher taxes that Iowans are paying to fund their government.

From 2013 to 2020, Iowa’s budget has grown 1.6 times faster than population growth plus inflation. This means that the cost of government is increasing at a faster rate than the average taxpayer’s ability to pay for government. This does not include the high property tax burden placed on taxpayers by local governments or the $9 billion in federal funds that Iowa received in FY 2019.



If the budget had matched population growth plus inflation over that period, it would have saved a family of four, on average, $430 per year. This may not appear to be a large savings, but for most families an extra $430 is a vehicle payment or extra money to place in savings. Either way, it is more choices of how to spend their hard-earned dollars.

Both Gov. Reynolds and legislative leaders have voiced their concern that Iowa needs a more competitive business tax climate, which the Tax Foundation ranks 40th in the nation. Taxes and spending are two sides of the same coin and Iowa’s high individual and corporate income tax rates will not be reduced if spending is not limited.



Controlling spending will take discipline.

Iowa’s budget has a 99 percent spending limitation in law, which means that the legislature must spend at least 1 percent less than projected revenues. Strengthening the spending limit with a constitutional amendment and limiting spending to no more than population growth plus inflation would help keep spending in line with the average taxpayer’s ability to pay. This is an important measure because it accounts for more people paying taxes and higher wages that are highly correlated with inflation.

The Tax Education Foundation’s Conservative Iowa Budget sets the maximum threshold on appropriations based on population growth plus inflation over the last year. Specifically, the maximum threshold on 2022 General Funds is $7.88 billion after an increase of 1.38 percent. Achieving this feat will help keep more money in Iowans’ pockets so they have abundant opportunities to prosper.

 

Controlling spending is the most difficult thing for a government to achieve because the demands on government continue to grow. Numerous special interests are also applying pressure on the legislature for greater spending, which often crowds out the voice of taxpayers.

History has demonstrated that governments cannot spend and tax their way to prosperity. Iowa only needs to look at our neighbors in Illinois to see the consequences of out-of-control spending.

Policymakers should consider the Conservative Iowa Budget and work to further limit spending. Keeping spending levels low will not only serve the taxpayers’ interests, but it will also make Iowa more economically competitive so that they have more opportunities to achieve their hopes and dreams.



John Hendrickson is policy director at Tax Education Foundation of Iowa and Vance Ginn, Ph.D., is chief economist at the Texas Public Policy Foundation based in Austin, Texas. He is the former chief economist of the White House’s Office of Management and Budget (OMB) during the Trump administration.

https://thecannononline.com/iowa-needs-a-conservative-budget/

The COVID-19 pandemic has changed our routines, but it doesn’t change the laws of economics. Yet it seems government is in the business of doing something when it really should do nothing, such as the recent proposals by President Biden and Congress to spend more and raise the federal minimum wage in the name of pandemic relief.
These actions would not only make a bad economic situation worse, especially for the ones the policies are intended to help, but they would destroy the unity that the president says he wants.
We’ve already seen the devastation that government action can cause during the pandemic, as the broad U6 unemployment rate remains at an elevated 11.1% and almost 800,000 people are filing initial jobless claims every week. The government shutdowns are an unfolding tragedy, and we won’t know their full extent for years to come.
But, as usual, there’s another attempt to put a patch on the American economy with an unnecessary, poorly crafted monstrosity of a $1.9 trillion COVID-19 relief package, which includes raising the federal minimum wage from $7.25 to $15 per hour by June 2025.
This boondoggle sends taxpayer money to people through checks when real personal income reached a record high in 2020. Its higher unemployment payments will distort incentives to work. And it will bail out profligate state and local governments when they’ve already received nearly three times more in taxpayer funds than their estimated losses.
Collectively, this package could delay the needed reopening of our economy, the only real path to regain Americans’ taken prosperity.
The focus of a package—if it must be done—should be to get the vaccines out as quickly as possible to open America now so that people can regain their prosperity they had before the pandemic. Better yet, a pro-growth approach of spending restraint, tax relief, and deregulation would be a better federal response.
In fact, the latter two measures (tax relief and deregulation) were practiced by the Trump administration and it contributed to records of the highest real median household income and lowest poverty rate in 2019. And while President Trump’s budgets found more fiscal savings than any other president, Congress continued to spend excessively—thereby bankrupting us and our country in the process.
But what’s getting a lot of media attention recently without much consideration of its cost is the Raise the Wage Act that the Democrats in Congress are trying to push through. This arbitrary hike of the federal minimum wage would be a mistake as it would separate us in terms of economic status and further divide us as a nation. That’s not what I would consider as “unity.”
According to a 2019 Pew Research poll, about two-thirds of Americans supported increasing the minimum wage to $15. But at what cost, given that nothing is free?
For example, the Congressional Budget Office recently reported that passing the Raise the Wage Act could mean as many as 2.7 million workers lose their job and earn the real minimum wage of $0. This would also come at the cost of $54 billion more to the national debt, further bankrupting us. And while the number of people lifted up from poverty could be 900,000, many of them will face higher prices, higher taxes, and higher interest rates making it harder for even those lucky enough to not lose their jobs to make ends meet.
But this analysis misses two key points that should not be overlooked: 58.5% of Americans earning the minimum wage are between 16 to 24 years old, and costs of living vary greatly across states, with California being 50% more expensive than Texas.
This means that those who will be hit hardest by raising the minimum wage are those just trying to get their foot on the bottom rung of the economic ladder, and typically have other sources of income. In fact, raising the minimum wage can benefit high-wage, highly skilled people at the expense of low-wage, low-skill people as employers move from labor to capital in their operations. This actually increases income inequality.
And states that have done a good job in keeping the cost of living low, like Texas (due to more pro-growth policies resulting in increased economic freedom) are hit hardest compared with those that don’t, like California. We should let federalism’s system of “laboratories of democracy” continue to prove that people vote with their feet, as the number of Californians moving to Texas increased by 36% in 2018.
America may still be suffering through the chaos of COVID-19, but that doesn’t mean we need more of it. President Biden should give doing nothing a chance, especially his policies that will bankrupt the country and force increased unemployment.

https://www.texaspolicy.com/president-bidens-unity-policy-means-increased-poverty/

Given the economic situation with many unemployed Texans struggling from business closures in response to the COVID-19 pandemic and government restrictions and following recent power outages, the Legislature should consider less spending, taxing, and regulating so Texans have more opportunities to prosper.
Invited testimony submitted to the Texas House Committee on Appropriations – S/C on Article II

https://www.texaspolicy.com/opportunities-for-self-sufficiency-dignity-and-prosperity-in-texas/​

Given the economic situation with many unemployed Texans struggling from business closures due to the COVID-19 pandemic and government restrictions and following recent power outages, the Legislature should consider less spending, taxing, and regulating so Texans have more opportunities to prosper.
Invited testimony submitted to the Texas House Committee on Ways & Means

https://www.texaspolicy.com/texas-needs-a-responsible-recovery-agenda/​