Gov. Terry Branstad and the Iowa Legislature have a once-in-a-generation opportunity next year to make meaningful changes to Iowa tax laws.

Economic circumstances and fiscal policies have combined to provide state government with its largest-ever budget surplus of nearly a billion dollars.

You can trace much of that extra cash to the strong farm economy of the last several years, which has helped bolster seemingly unrelated sectors, including technology, finance and retail, at a time when so much of the country was still crawling back from the economic collapse.

State leaders also deserve credit. The 10 percent across-the-board spending cuts that Gov. Chet Culver made in 2009 were painful but effective. And since returning to the governor’s chair in 2011, Branstad has been vigilant – some might say ruthless – in his stewardship of state finances.

Tax reform is an issue that Iowa lawmakers wrestle with nearly every year.

Inevitably, they fail for a number of reasons, but most specifically because the state treasury, until now, did not have enough cash reserves.

It’s really quite simple. Major tax reform plans require up-front spending to cover ongoing costs while tax rates are adjusted to create a fairer system.

The most obvious example involves efforts in recent years to make property taxes more equitable. Most experts agree that commercial property tax rates in Iowa are too high. The governor and others argue that if property taxes on businesses were lower, the increase in development would eventually offset the lower rates. But there would be a lag period, during which someone would need to make up the difference.

The same is true of efforts to lower, or even eliminate, corporate income taxes.

Economic models show that Iowa would be better off if we lowered or eliminated corporate income taxes. The problem has been that, up until now, we have not been able to afford the short-term pain needed to achieve long-term gain.

Now with a surplus of nearly a billion dollars, we can. But if lawmakers are going to engage in serious reform, they will need to make the changes relatively quickly, because the longer they wait, the more claims will be made on the surplus.

Already, Democrats are saying they want to use the extra cash to restore funding to many of the programs cut by Culver and Branstad.

Meanwhile, Branstad wants to use a sizable portion of it to make landmark changes in education.

I have my own pet project. I’d like to see a good chunk of the surplus used to provide funding for one-time projects, including flood control and water and sewer system updates, which are desperately needed by cities. State government has a long history of stacking increasing responsibilities on cities without giving local governments the ability to pay for them.

The bottom line, however, is that no one should be allowed to start dividing up the surplus until a tax reform plan is signed, sealed and delivered. Otherwise, the opportunity for reform will once again pass us by. And who knows when it might return.

One thing I can guarantee is that the agricultural prosperity that has brought us to this point won’t last much longer.

Elbert Note:

I ran into developer and Democratic contributor Bill Knapp last week and mentioned how Hurricane Sandy had tilted the election in favor of President Barak Obama.

“What do you think Romney should have done when Sandy hit?” Knapp asked. I didn’t have a good answer, but he did.

“He should have pledged $10 million of his own money to the relief effort and said that he was going to lean on all his rich backers to do the same,” Knapp said.

Good thing for Obama that Knapp is a Democrat, I thought.