Ask a conservative how to increase economic activity and immediately you’ll get, “Cut taxes.” Too bad the data doesn’t support that answer.
On May 11, the Bureau of Economic Analysis released its quarterly Gross Domestic Product By State report. Iowa was 47th in the nation for fourth quarter growth. The states worse? Wyoming, Kansas and Mississippi. The leaders? Texas, Florida, Utah, Washington, Oregon, Idaho, and the District of Columbia with growth rates ranging from 3.4 to 2.7 percent.
According to the Tax Foundation, the state with the best tax climate for business are Wyoming and Utah, states at different ends of the GDP scale. Texas, with its 3.4 percent GDP increase, ranks 49th in corporate tax climate with Oregon coming in 35th. Iowa ranked 47th in corporate taxes and 40th for property taxes, three years after the 2013 tax reform bill.
How has Iowa done? Looking at private sector performance in the four years before the tax bill, we averaged 4.6 percent growth. Since then? 3.2 percent. Yes, agriculture has taken a hit over the past few years, but the point of tax reform was to diversify our economic portfolio with growth in other areas. That didn’t happen.
So, what does this all mean? That other factors figure into economic growth besides taxes. Proximity to supply, location, product demand, transportation infrastructure, and regulation are part of this equation too.
So when you hear or read that we need to cut taxes, remember we’ve already done that. It didn’t work.