Income Taxes

Iowa’s Population Dilemma

During the first decade of the 21st century Iowa’s population grew by an estimated 3.6 percent. Population is a major concern for Iowa’s policymakers because of the need for workers. Iowa’s low unemployment rate is even surpassed by the vast amount of open jobs that need to be filled. Solving Iowa’s workforce dilemma is a bi-partisan priority of Iowa policymakers.

United Van Lines has released their 2019 National Movers Study, which measures how America moves from state to state. Unfortunately, Iowa ranks in the top ten states for outbound migration. United Van Lines estimated that Iowa has a 55 percent outbound rate. Some of the reasons for Iowa’s high outbound population include:

 

  • Health: 4.65 percent
  • Lifestyle: 6.98 percent
  • Family: 10.85 percent
  • Retirement: 12.40 percent
  • Job: 68.22 percent

 

This trend is not good for Iowa’s economy, especially the 68 percent who left for a job opportunity. Iowa did have a 45 percent inbound rate of newcomers. The prime reasons for Iowa’s newcomers include:

 

  • Health: 5.32 percent
  • Retirement: 5.32 percent
  • Lifestyle: 6.38 percent
  • Family: 24.47 percent
  • Job: 61.70 percent

 

Close to 59 percent of those outbound Iowans ranged from 18 to 54 years of age. This is the prime working age, while 41 percent of those outbound were 55 years or older. An estimated 58 percent of individuals, age 18 to 54, were inbound to Iowa. This means that Iowa almost broke even in this crucial age range for workforce development.

 

Many of the states that join Iowa in the top ten ranking for outbound migration tend to have higher tax rates. Some of these states include New Jersey, Illinois, Connecticut, New York, California, among others. High tax rates are creating a mass exodus especially in Illinois and New York. Iowa’s high tax rates are not helping the population dilemma. The Tax Foundation has ranked Iowa, 42 out of 50, in the top ten states for worst business climate. Iowa is also  ranked by Kiplinger as a “not a tax friendly” state.

 

States are in fierce competition with each other over businesses and people. “This means that state lawmakers must be aware of how their states’ business climates match up against their immediate neighbors and to other regional competitor states,” noted Jared Walczak, who serves as Director of State Tax Policy for the Tax Foundation.

 

Tax rates matter. States with low tax rates are seeing greater population increases and more job growth. United Van Lines reported that some of the states in the top 10 for new inbound residents include Iowa’s neighbor South Dakota, which does not have a state income tax, Arizona, Florida (also a no-income tax state), North Carolina, among others. South Dakota had a 57.4 percent inbound rate with 72.22 percent coming for a job opportunity.

 

“When excessive regulation, progressive policies, and high taxes drive residents to move to other states, a form of interstate competition is at work,” wrote Mark Pulliam who is a contributing editor of Law & Liberty.

 

High tax rates not only punish economic growth but for every dollar state and local governments take away in taxes it is less economic freedom for individuals and businesses. For several years the bipartisan consensus has been that Iowa needs greater population growth, but you cannot expect to keep or attract people with excessive taxation.

 

If Iowa wants to attract more people and create a stronger and more competitive economy, it is time to reduce tax rates across-the-board.

 
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