The Case For Dynamically Scoring Iowa's Tax Reforms

Most people are not aware, but when tax legislation enters the committee process it is "scored" by a bureau at the Capitol in an effort to predict the increase, or decrease, in the State's tax revenues. And there are just two kinds of scores: static and dynamic. Static means that nothing will change, and dynamic means people will react.

Static scoring is the norm and looks at every proposal in the worst possible light in order to predict the impact of any change, which is why discounting, or tax cuts, tend to have the worst time becoming law. Statically, if people are not allowed to move out of state, then a tax increase will yield more in tax revenue. But dynamically, people move all the time, which is why IDT! has used discounting in mass-merchandising as one of its examples of how to reward taxpayers.

In other words, if people are willing to go to Hy-Vee, Home Depot, Lowe's or Wal-Mart because they can get quality merchandise and keep more of their money, then experience shows that shoppers respond dynamically to the discounting of that merchandise. And history has shown that taxpayers, meaning you and the businesses located here in Iowa have reacted, and will continue to react just as dynamically to discounts, (meaning that people and businesses will locate here), to take advantage of this rewarding solution. That's what creates jobs and drives property values up, building real wealth.

Consequently, if Iowa "discounts" its taxes right now, people will react immediately by making plans to stay, instead of leaving. Or ex-Iowans will, in many cases, move back to Iowa if they have moved their residence out of state. Better still, experience shows that new people will come to Iowa because of the more rewarding tax structure and the quality of life. But you have to have both: discounted taxes and a high quality of life.

In closing, it's worth pointing out that there hasn't been anything static about our universe since the "Big Bang", and that Iowans can still benefit from this session if our legislators and Governor act now. And to support them, IDT! has asked The Beacon Hill Institute to revise their static and dynamic scorings for our proposal, one more time, in light of the increased revenue estimates from the Revenue Estimating Conference. With higher revenues already expected, this is the time to discount Iowans' income taxes.