A Creighton University economist is suggesting Iowa legislators should tread carefully as they craft a tax cut package.
Republican lawmakers like Senate GOP Leader Bill Dix point to state tax cuts of the 1990s as proof cutting taxes will spark the economy and lead to state tax revenue growth. Creighton’s Ernie Goss says that’s true “in some cases,” but he’s not predicting that for Iowa now.
“When we cut the rates, generally speaking, the collections from the taxes are reduced. That’s what happened in Kansas. There was not the supply-side bump and in this case when you’re at full employment, it’s hard to get that supply-side bump,” Goss says. “Where are you going to get the workers? Why can China grow at three times the rate of the US? Well, they have more fuel for the fire – labor that can come into the market. We don’t have it.”
Kansas Republicans enacted a plan in 2012 that dramatically cut taxes.
“I think you need to do it in a more thoughtful manner, if you’re going to cut and they did cut,” Goss says. “But also you have to understand that some of the spending’s also going to need to be cut.”
Goss says despite deep cuts in education and other areas over the past few years, the state budget deficit in Kansas is now $900 million. Republicans in Iowa say one difference now is the extra taxes the state should collect due to federal tax law changes. Goss cautions against counting on that “windfall” — as he predicts it won’t be as large as predicted.
Goss made his comments during a recent appearance on Iowa Public Television’s “Iowa Press” program.