By Luke Clausen
Former Iowa Gov. Terry Branstad said Tuesday that current tax legislation wouldn’t have been possible without the economic restructuring that happened in Iowa after the farm crisis.
“The state of Iowa is in the best financial position it’s ever been in history, I think over $3 billion surplus and they’ve already eliminated the tax on retirement benefits and moving to a flat 3.9% income tax,” Branstad said. “Those things would not have been possible if we hadn’t planted the seeds and started to focus on diversifying the Iowa economy and adding value agriculture that we did back during the farm crisis.”
Branstad, who also served as U.S. ambassador to China during the Trump administration, spoke at an event held at the World Food Prize Hall of Laureates in conjunction with the State Historical Society of Iowa. He discussed his time leading through the 1980s farm crisis and as ambassador to China.
Republican Gov. Kim Reynolds has said her goal is to eliminate Iowa’s income tax by 2026. The Senate Ways and Means Committee advanced a bill last month to begin that process, but the House has not considered it. The two chambers have yet to reach agreement on proposed property tax limitations.
Branstad’s comments were juxtaposed against an audience question about his approval of a state sales tax increase during the crisis.
“I didn’t want any tax increases. Then I got to be governor and I found out how bad the finances of the state were. If we were going to be able to make our commitment to schools and if we were going to reduce our dependency on property taxes for the court system, we needed to do something. And so it took a lot of courage, but in the budget message, I think I’d been governor for a week, I got out there and recommended a sales tax increase because the Democrats controlled the Legislature and they were delighted,” Branstad said.
“Of course, I think it’s critically important that we be very careful spending our money so you don’t have to raise taxes,” he added. “But again, at that time we were in the farm crisis period. If we were going to really make our commitment to education and reduce our dependence on property taxes, I didn’t see any other alternative.”
The farm crisis “was a gut wrenching, challenging time” for Iowa, he said.
“One of the most gut wrenching was, there was a farmer from Hills, Iowa,” he said. “[He] killed his neighbor, killed his wife and killed his banker, John Hughes, and then killed himself… [His] daughter had babysat for us… So things [hit pretty close to home].”
Branstad highlighted biotech, ethanol, and entrepreneurship as the prime ways Iowa diversified after the crisis.
“So we came up with — and this is in the depths of the farm crisis — when the state didn’t have a lot of money, we increased funding for biotech research at Iowa State $5 million a year for three straight years. And we built a biotech research facility there,” he said.