Business Climate - Iowa Chamber Alliance

Business Climate

ICA is committed to improving Iowa’s general business climate through tax code improvements, sensible regulatory structures, and myriad infrastructure investments to ensure a policy environment that spurs business growth. We recognize the positive changes to the tax code in 2018 and our members continue to reap the benefits as full implementation takes place. Nonetheless, Iowa has the second highest corporate in-come tax rates in the country. ICA recognizes the impact that this status may have on the state’s competitiveness for potential economic development projects and seeks ongoing reform.

Taxes

ICA maintains that Iowa’s property tax code remains overly complex and burden-some. Iowa’s poor ranking (42nd) for business climate in the Tax Foundation’s 2020 State Business Tax Climate Index is no longer accurate measure, as the income tax reforms of 2018 are not reflected in the study and have yet to achieve full implementation. That said, Iowa’s adjusted top corporate rate of 9.8 percent is lower than only Pennsylvania and New Jersey. This high advertised rate excludes Iowa from even competing for prospective economic investments. We will advocate for any potential sales tax increase to address this rate where a lowering to 8 percent can have a dramatic impact to the attracting of outside investment.


Despite the improved overall ranking, the Tax Foundation ranked Iowa’s business property taxes 39th in the nation for competitiveness. This is a result of increased valuations and assessments since reforms were passed in 2013, effectively erasing any positive impact. In addition, the structural problems have been present for 40 years and are a direct result of different treatment of the four main classes of property taxpayers. The reform from 2019 provide increased transparency for property taxpayers but did not fundamentally address any differential treatment.


ICA will utilize the following principles to guide its analysis and advocacy for any tax reform proposals that include rate reductions for corporate income tax, and comprehensive property tax reforms that treat commercial and industrial classes of property taxpayers fairly and equitably:

COMPETITIVE: Tax reform ought to be geared to make Iowa more competitive: fewer brackets, targeted exemptions, effective cred-its, and lower rates for personal, small business, and corporate income taxes, and less complex and burdensome for commercial and industrial property taxes.
INVEST IN GROWTH: Programs, credits, and incentives should be focused on spurring economic growth across diverse industry categories. These incentives have a demonstrated return on investment and need to be encouraged and treated differently than other tax credits.
SIMPLE: Iowa’s tax code is unnecessarily complex, and any changes must seek to make it simpler. Iowa’s tax code must be understandable to taxpayers and attractive to outside investment.
PERMANENT, PREDICTABLE AND CERTAIN: A well-crafted tax policy will have permanence, avoid short-term changes, and ensure the predictability of Iowa’s tax landscape so businesses can make long-term investments in Iowa. Any changes ought to require minimal interpretation by the Iowa Department of Revenue. Clarity and certainty need to be in the Code.
FAIR AND RESPONSIBLE: Tax policy should be equitable and not favor one classification of business over another. Any changes to the tax code should not inflict harm on the overall fiscal health of state or local governments.
TRANSITION PATH: How we transition from the tax code of to-day to the tax code of tomorrow is equally as important as the reform itself and, if done correctly, satisfies the “responsible” condition listed above.

We understand that changes to the tax code are challenging, so we also urge the state to utilize innovation to attract potential new investment, such as allowing businesses to organize as Benefit Corporations or “B-Corps” to attract entrepreneurs interested in the incorporation of social responsibility into their money-making practice which also attracts younger talent to the state.

Sound Budgeting

The fiscal health of state and local governments proves to be a determining factor in attracting and retaining businesses. Accordingly, a concerted effort to regularly modernize and reform budget practices must be made. This includes multi-year budgeting and strategically reviewing expenditures with a focus on major cost drivers. ICA sup-ports efforts to reduce revenue demand from local and state governments through public pension reforms and other measures that could positively impact local government budgets without tax increases.


ICA supports providing adequate funding to meet existing budget obligations. From a legislative perspective, this may include providing tax credits and backfill to local governments, as was promised during the 2013 property tax reforms. Rescinding the backfill will result in a de facto local property tax increase on property, which we argue is otherwise disproportionately paid by Iowa businesses.

Reasonable & Predictable Regulation

ICA continues to support state cooperation with businesses and stakeholder organizations to conduct periodic review and cost-benefit analysis of agency rules and regulations. Such reviews help ensure a minimally invasive and efficient regulatory environment. Rules and regulations should be evaluated for necessity, effectiveness, cost-efficiency, enforceability, and financial impact. Regulatory stability and responsiveness must be recognized as critical components of a healthy business climate.

Cybersecurity is an increasing concern for our members who experience attacks from both physical and digital threats. As our economy continues to move in a digital direction, we must balance the free flow of commerce and information and safeguarding our businesses and consumers from cybersecurity risks.

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