Have no fear, Iowa, ‘dynamic’ tax cuts are here

‘Dynamic” is an exciting word. Just ask Batman and Robin, the Dynamic Duo.

So, when a report came out this week touting the “Dynamic Economic and State Revenue Impacts” of all the income tax cuts passed in recent years, it was hard to not feel a tingle of exhilaration.

The study came from Common Sense Institute of Iowa, a conservative research organization, or think tank, if you prefer. It used a model to calculate the “dynamic” impacts of those tax cuts.

Forget your plain old boring math, which might make you think cutting taxes by $2 billion in Fiscal Year 2026 will reduce state revenue by $2 billion. What, are you using an abacus?

Get dynamic. Common Sense’s model shows income taxpayers will save $1.85 billion over the next 10 years with a $3 billion increase in after-tax income. Iowa’s GDP will grow by $1.72 billion and 6,800 new jobs will be created. And the state will not have to cut its budget come hell or high water. State spending still will rise 3 percent annually, according to the model.

It seems too good to be true. But Gov. Kim Reynolds, who signed the tax cut into law, is endorsing the report. Who am I say she’s wrong?

And the model may be right about the state budget, at least for a while. If Republicans who control the Golden Dome of Wisdom, now redder than a ripe strawberry, keep lowballing the state budget, socking away billion-dollar surpluses, and funneling billions into the Taxpayer Relief Fund, they could balance the budget. Sort of like Jenga. Also, the study predicts the economic impact of the tax cuts will cut potential revenue losses by $120 million over 10 years.

Sure, a 3 percent budget increase is the “historic average,” according to the study. But that’s another term for status quo. If you’re concerned about inadequate spending on public schools and universities, current reality will be locked in place. The state created a massive entitlement program giving state-funded scholarships to private school students and has taken on funding Iowa’s mental health system. Competition for bucks will be fierce.

But when tax cuts are your top priority, none of that other stuff matters. Most of the benefits go to top earners, but surely dynamic economic growth will trickle down and make everyone a winner.

I talked with Sean Finn, policy analyst from Common Good Iowa, a research organization, or think tank, on the other side of the political aisle. Finn says models like the one used by the Common Sense Institute provide results based on the data put into the model. The study doesn’t detail those inputs.

Maybe the Common Sense Institute will be on the money. Or maybe the tax cuts will be less than dynamic. Every new cut is sold as an economic miracle.

When Kansas approved an $824 million tax cut in 2012, a dynamic analysis predicted the revenue drop would be $714 million. That $110 million difference would be generated by economic growth. But in the end, revenue dropped even beyond $824 million, leaving a big budget mess.

Regardless, we’ll probably be hearing the Common Sense Institute’s numbers repeated over and over during the fall campaign. Republicans will tell us big tax cuts are possible with no harm done. It should result in dynamic skepticism .

(319) 398-8262; todd.dorman@thegazette.com