Improving Competitiveness: Legislature Looks to Tax Reform

January 14, 2022 | Improving Competitiveness Gigi Wood,

The Iowa Association of Business and Industry (ABI) applauds the efforts and shares the goal of continuous improvement, but more could be done to enhance our state’s business climate. At one point, Iowa was ranked as low as 45th in overall business climate competitiveness. Now, depending on the list, Iowa comes in at 44th according to U.S. News & World Report, 38th on the 2022 State Business Tax Climate Index by the Tax Foundation, but is entirely absent from Site Selection Magazine’s business climate rankings. It is time for Iowa to adopt policies that will dramatically improve our competitive standing. 

In December, the Iowa Revenue Estimating Conference issued its prediction for future tax revenue, saying that revenue will increase by 3% in fiscal year 2022 and 1.7% in 2023. With extra money coming in, reducing Iowa income tax rates is going to be a top legislative priority of many lawmakers and advocacy groups. ABI plans to lobby for several issues that will reduce taxes and improve the state’s business environment. 

ABI’s legislative priorities for 2022 include tax reform, changes to the unemployment system and regulatory reforms, as well as infrastructure funding oversight. 

“In 2022, ABI will be seeking reforms to our unemployment system that help the unemployed return to the workforce and provide sustainability to the state’s unemployment trust fund,” said Brad Hartkopf, director of public policy at ABI.

The association’s legislative agenda reflects the priorities of its members, he said. 

“The 1,500 members of ABI offer goods and services around the globe – in manufacturing, financial services, food production and other industries,” Hartkopf said. “A competitive business environment, with a stable and available workforce and a tax system, which does not ask more of businesses here in Iowa than employers in other states, will allow for economic growth and wealth creation.” 

ABI plans to advocate for a more competitive tax climate for employers, he said. One way to keep the business environment competitive is by reforming the unemployment taxes dedicated to the Unemployment Insurance Trust Fund (UITF), he said. The UITF is funded by taxes levied on Iowa employers. In an unprecedented move, several hundred millions dollars of coronavirus federal relief funds were deposited into the UITF to ensure the stability of the fund. 

“The COVID-19 pandemic put a spotlight on just how fragile the balance and maintenance of the trust fund can be,” Hartkopf said. “Thanks to Gov. Kim Reynolds’ leadership in depositing federal monies into that trust fund, Iowa employers are set to remain in the same tax table for 2022 that they were in last year.”

“Iowa employers pay taxes into the UITF for some purposes that employers in a number of our neighboring states do not,” he said. “In order to remain competitive with our bordering states, it’s vital that the Legislature enact reforms which modernize the UITF while also maintaining a system that can deliver benefits to Iowans who are unemployed through no fault of their own.” 

The association will also keep close tabs on how infrastructure funding is spent, ensuring broadband is prioritized. Improving internet and broadband accessibility at high speeds needed by Iowa manufacturers has been a top priority of many Iowa employers, including those located in rural areas and those with remote workers. The approved $1.2 trillion federal infrastructure bill has $65 billion earmarked for broadband. Through federal grants and state funding, Iowa has $400 million set aside already for improving broadband access.

The ABI policy team will be at the Iowa Capitol throughout the session. 

“ABI will be working with policymakers to ensure that the business community’s priorities are acted upon in 2022,” Hartkopf said. “The policy team will be at the capitol each and every day during the legislative session advancing the association’s interests. We’ll also be encouraging our membership to engage their locally elected officials as to why policymakers should implement these priorities.” 

Since 2017, ABI has supported more than 40 bills that passed the Legislature and have been signed by Iowa governors, he said. Those issues include spearheading workers’ compensation reform, ensuring employers can maintain a zero-tolerance policy for drug and alcohol testing and helping lead the passage of the COVID-19 limited liability shield. 

“ABI is motivated to take on challenging issues that significantly improve how employers are able to function in Iowa,” Hartkopf said. “Notably, none of the issues listed, or matters such as increasing Iowa’s workforce housing stock, expanding affordable childcare or making high-speed broadband more available could have been accomplished without a pro-business governor and Legislature. They understand that in order for businesses to thrive, the state must advance policies that address the needs of both employers and their employees alike, which is what we’ve seen occur over the last several years.”