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Huskers May Lose to Hawkeyes, on Taxes Anyway

by Jim Vokal

The Huskers have an all-time football lead over the Hawkeyes (29-14-3 before Friday’s contest), but on tax reform, Iowa may be ready to force a Nebraska fumble. Like Nebraska, Iowa has a rotten tax system that imposes high income tax rates on working families and small businesses.

But imagine what would happen if Iowa suddenly climbed the rankings to have one of the ten best tax systems in the country. They would rush past us in business competitiveness. More than half of Nebraska’s population would be living within a one hour U-Haul drive of a starkly better state for workers and entrepreneurs.

This isn’t fantasy football.

The nation’s leading independent tax research organization, the Tax Foundation, reports that Iowa has many options to become the most economically competitive state for business in the Midwest. In 2013, Iowa was already #1 for relocating Nebraskans, since Iowa might as well be Texas with its favorable tax treatment of veterans and retirement incomes.

The election has also caused a turnover in legislative leadership, placing Iowans in scoring position for income tax reforms benefitting all taxpayers.

“We have to create a whole new environment for economic growth,” said Iowa Sen. Randy Feenstra. “That starts with changing our tax system to make us more competitive.”

Iowa voters grew tired of tax reform bills passing in the state’s Republican House, only to die in the Democratic-controlled Senate. For the first time since 1998, a Republican majority controls both chambers, and lawmakers plan on delivering income tax reforms to Republican Gov. Terry Branstad’s desk.

Here in Nebraska, the Legislature’s tax-levying Revenue Committee will see substantial change as well. But even with many of their favorite senators now being sidelined, the high-tax lobby in Lincoln will try to pump fake their way through this legislative session, as if no election occurred.

They will say Nebraska is one step away from being Kansas, that the state is short on money, and that Nebraska has already cut taxes too much. Never mind the facts: that in both fiscal and football terms, Nebraska is 9-2 and Kansas is 2-9.

These high-tax groups might be entitled to run out the clock like this if they still had the ball, but following the decisive election, Nebraska’s taxpayers need to be throwing the flag for delay of game.

The Tax Foundation has published remarkably commonsense tax reform playbooks for both Iowa and Nebraska.  By following their responsible, economically sound recommendations, both states can raise the same amount of money while relying on a less burdensome tax structure.

While each study takes into account our unique policies, the overall theme is similar — Iowa and Nebraska should close outdated loopholes in their tax bases to help reduce the high income tax rates and destructive property taxes that are hurting families, farmers and ranchers, and small businesses; stifling our economic growth.

Now that our shared ag economy remains in a slowdown and families in both states are struggling to get ahead, neither Nebraska nor Iowa can afford to keep playing not to lose. Both states have ranked below the national average for employment and population growth.

But both state governments—thanks to generous taxpayers—are well-situated financially. Nebraska and Iowa are ranked “flush with cash” and well prepared for a potential recession by the Mercatus Center at George Mason University. It’s time for our leaders to seize this opportunity, as Iowa will, to help taxpayers accelerate out of this slump.

Iowa may completely break through the smug high-tax narrative in our state capitol, overcoming the fear-mongering about Kansas, the obstruction of special interests, and the economic challenges of these times, to deliver meaningful tax reform for their citizens.

As the Tax Foundation notes, comprehensive reform in Iowa “could improve its ranking as much as 30 places, giving it one of the top 10 tax climates in the U.S.” That would take Iowa from having the worst-ranked tax system among our neighbors to the best, leaving Nebraska dead last.

Fortunately, both states can actually win this match-up and create an even better environment for opportunity in the Midwest. But that will depend on whether Nebraska’s taxpayers give some much-needed coaching to their senators in this coming legislative session.