Two Midwestern economists agree a state’s economy can be aided by a “competitive” tax system, but not necessarily by new tax incentives or the dramatic cut in commercial property taxes legislators are considering.
Creighton University economist Ernie Goss would start, instead, by lowering income taxes on individuals and corporations.
“I see too much in terms of incentives,” Goss says of Iowa’s tax system.
Iowa State University economist David Swenson says “efficient” and “well-run” state and local governments can be the “foundation” for a state’s economy, but he also sees the state’s income taxes as a key target for improvement.
“We need to lower the rates and broaden the base,” Swenson says. “We get rid of some of the distortions and/or the gimmicks — we make the system more predictable.”
Legislators and the governor have been negotiating for more than a year over a package that would lower commercial property taxes, but Swenson says state policymakers need to ensure there are “comprehensive” tax adjustments for all types of property, not just commercial.
“We have very, very beneficial provisions for ag-land, for residential properties,” Swenson says. “But the commercial side doesn’t get the same kind — just by virtue of how commercial property changes over time — doesn’t get the same kind of breaks.”
Goss, the economist from Creighton, says property taxes seem more onerous than income taxes, for example, because most people pay property taxes in two annual payments.
“Let’s focus more on the growth side. Let’s look at income taxes,” Goss says. “I think that’s where Iowa has some competitive issues.”
Goss and Swenson made their comments during taping of the “Iowa Press” program which airs tonight on Iowa Public Television.