Iowa Governor, Kim Reynolds, has proposed a state 4% flat tax. Reynolds calls it “flat and fair.” It appeals to many people because we would all pay the same percentage. Not the same amount, of course, if we make less we pay less; it is commensurate to everyone else.
A recent guest column in the Waterloo Courier supported Reynold’s plan stating: “the Blue State progressive tax and spend blueprint does not lead to prosperity.”
A new report by the Rockefeller Institute of Government throws some shade on that deduction, however. It found that red states receive more than their share, per capita, of federal benefits, fundeddisproportionately by blue states.
The columnist also pointed to Iowa’s $1.24 billion budget surplus as evidence of Reynold’s sound policy. Closer analysis contradicts that conclusion becausefederal Covid relief dollars came into the state enabling fewer state funds to be spent.
My question is how does a flat tax maintain Iowa’s budget if wealthier taxpayers are paying less?Obviously, state spending must be drastically cut.Where? Already underfunded education? Already reduced funding for public health? Iowa began investing in long overdue infrastructure, but will that be curtailed? Reynolds has already said her plan includes reducing unemployment benefits. Does that help 58,000 unemployed Iowans?
A flat tax, in theory, works if everyone has the same opportunities. And lived under similar circumstances.And if unforeseen circumstances like floods, tornadoes, or factory closings, are spread out equally among us.
Unfortunately, that’s not the case. Parity of conditionsis a delusion people use to congratulate themselves for their own hard work and personal fortitude but becauseof unexpected events, different environments, prejudicial hurdles, shortcomings and strengths, there is no “one size fits all.” Whether we are talking taxes, education, or healthcare.
A flat tax will benefit those who are doing well. They will pay less, no question. And those who are doing okay, may benefit a little. The math doesn’t hold up, however, for those who need it to the most.
People often counter with: “Then get a better job. Get the training you need.” That doesn’t work when you don’t have the means to pay for continued education or training. The person working part time and going to school for that very reason will pay more at 4%. It doesn’t work for someone who lost their job to downsizing or have mental or physical health challenges and cannot work full time. Standards that seem “flat and fair” to many of us can be herculean to others.
And it isn’t just those we recognize as suffering, it is the laborer who hasn’t gotten a raise commensurate to the cost of living in a dozen years. It is the necessary worker who makes only a minimum wage and workstwo jobs and still can’t break even. Is 4% the same burden to hard working teachers or social workers as it is to a millionaire?
A Flat Tax, as things exist, is a wealthy wolf in a working sheep’s clothing. The economy thrives when it works for everyone, not just those who can afford it.