In recent years, economic momentum in the Quad Cities has favored Iowa. Some exceptionally poor leadership in the governor’s office in Illinois over the last two decades coupled with a regressive tax system has hindered Illinois and fueled movement to Iowa. It hasn’t helped that over the last the last 30 years some area Realtors with large Iowa holdings have actively promoted Iowa at the expense of Illinois – often focusing on Illinois’ higher property taxes while saying little about Iowa’s higher income taxes.
However, Iowa is beginning to confront some of the same issues that have historically troubled Illinois. In 2018, the Iowa legislature passed the largest income tax cut in state history. Though this still leaves Iowa with higher income tax rates than Illinois would have even with Illinois Governor Pritzker’s proposed increases, sadly most of the benefit of the tax cuts went to the wealthiest Iowans. This seems both unfair and unreasonable.
Iowa also taxes retirement income, which Illinois does not. For those of us over a certain age, this clearly favors Illinois as a choice of residence.
What’s more, a side effect of recent state income tax cuts has been to reduce state funding for local governments, thereby forcing them to increase property taxes. Then, during its last session, the Iowa legislature capped property tax increases at 2% unless a higher rate is approved by two-thirds vote of the taxing body after public hearing. This is better than the original proposal which would have required a referendum for any higher rate. Done with the cavalier attitude state legislatures sometimes display in shifting burdens onto local governments, such measures can leave local governments and, potentially, schools underfunded and forced to cut services and quality — or to increase a host of other fees.
As the old saying goes, “there is no free lunch." Quality public services and education suffer if the taxes that support them are cut or eliminated.
These measures also put Iowa in the dubious position of moving towards some of the very things Illinois is rightfully moving away from: lower income taxes, particularly on the wealthy, higher property taxes, and underfunded local government and schools.
Add to this mix some mischievous legislation recently pushed in the Iowa Legislature to make the courts more political and to cut tax incentives favoring solar energy. Iowa has long enjoyed the reputation of having one of the finest systems around for selecting skilled and qualified judges without regard to partisanship. This is now jeopardized.
Meanwhile, the solar energy credit has already generated nearly 1,000 jobs in Iowa while also pointing the state towards a more environmentally sustainable future, while saving homeowners and farmers on their utility bills. Fortunately, this ill-considered legislation failed.
However, such measures as these imperil Iowa’s claim of having a responsible, bipartisan government concerned with conserving our natural environment.
Like Illinois, Iowa has many fine qualities. These include progressive tax credits for historic preservation and for charitable giving, as well as innovative programs like the Grow Iowa Values Fund set up several years ago. A productive work force and healthy economy are additional strengths Iowa shares with Illinois.
Yet a key lesson in building on strengths lies in preserving them, while learning from the successes as well as mistakes of one’s neighbors. Recent state actions in Iowa suggest this lesson is being forgotten or at least overlooked in Des Moines. If so, it will merely serve to gradually rebalance the attractiveness of Illinois compared with Iowa to prospective residents and businesses.