Lately, the supporters of Iowa’s 3.8% flat tax have been trying to convince us it is boosting the state’s economy.
This is probably a surprise to most Iowans.
I have written extensively about Iowa’s economic failings. From meager growth rates to a struggling labor market, we’re falling behind. Yet, supporters of the flat tax tell us we’re actually winning.
The primary evidence for this assertion is Gov. Kim Reynolds’ claim that since 2024, Iowa has attracted $20 billion in new capital investment.
I haven’t seen a breakdown for this figure, but we do know this: Iowa is increasingly attracting large new data centers, and some of their owners say they plan to spend billions of dollars in the state.
These data centers cost huge sums of money to build, and they draw lucrative government incentives for their owners.
Their downside is they tend to create relatively few permanent jobs. As a recent Brookings Institution study pointed out, “large data center projects often promise only dozens to a few hundred permanent workers.”
Many other data centers don’t even offer that many jobs. Meanwhile, they empower artificial intelligence, which is a risk to existing jobs as well as future employment growth.
They also are generating local opposition because of their impact on water supplies and power grids, among other effects.
Proponents of Iowa’s flat tax don’t just point to new capital investments, but also to think tank rankings, to bolster their contention that Iowa is winning the economic competition against other states.
I don’t think Iowans care much about think tank ratings and capital investment figures. What they do care about is being able to find good jobs at decent wages. And on both of these counts, our state is failing.
Just look at the job creation figures for Iowa and the six states that adjoin us from the beginning of 2024 through April 2026, the most recent data available.
Six of these states added jobs during this time period, according to the US Bureau of Labor Statistics.
Only one state lost jobs.
That’s right: It was Iowa.
Not only did Iowa lose jobs and all our neighbors gain them over those 28 months, but even our “high tax” neighbors outdid us.
Take Minnesota.
Since the beginning of 2024, our neighbors to the north added 46,000 new jobs. This is true even though Minnesota maintains the kind of progressive income tax system Iowa used to have, with a top rate of 9.85%.
Even Wisconsin, which also has a progressive income tax system and a top rate that is twice as high as Iowa’s, created jobs since 2024. Not a lot, but it also didn’t lose 9,000 jobs like Iowa did.
Iowa also lost to most of our neighbors when it came to weekly wages over the past 28 months.
Out of the seven states, Iowa finished fifth in the rate of growth for average weekly wages in the private sector, according to the Bureau of Labor Statistics. Illinois, Nebraska, Missouri and Wisconsin all did better. South Dakota and Minnesota were behind us.
More importantly, Iowa’s average weekly wages failed to cover the rise in the cost of living, as President Trump’s broad-based tariffs and the Iran War pushed prices higher.
Yet, the special interests and the politicians try to talk us into believing we’re thriving. They even want us to vote to enshrine this failing income tax system in the Iowa Constitution this fall.
As I pointed out a week ago, this will undoubtedly lead to an increase in the sales tax, just like it has in the past.
Iowa’s flat tax isn’t working. Meanwhile, dramatically falling state revenues — mainly due to the new system’s generosity toward the rich — has left us unable to meet the real needs of Iowans.
• We’ve failed to adequately address Iowa’s high cancer rate.
• Our waters are polluted.
• Medicaid shortfalls forced the state Legislature to raise taxes on health insurance plans. Future shortfalls are expected to be even bigger.
• Funding for public schools have stagnated, failing even to keep up with inflation.
• Then there’s our state budget, which is facing a $1 billion-plus operating deficit. Again.
Supporters of Iowa’s flat income tax will point to a variety of shiny objects to try to convince you their radical departure from Iowa’s traditional progressive income tax system is rejuvenating the state’s economy.
But when it comes to the things that matter most to everyday Iowans — decent jobs and higher pay — we are not winning. We’re losing.
Iowa’s politicians need to stop experimenting with our tax system to try and please the special interests and think tanks. We need smarter economic policies that work for all Iowans; that create and protect good jobs and raise incomes so families can get ahead.