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Iowa's Taxes Lower Than Most States

Census Data Show Iowa Taxes Rank Below Most States and U.S. Average

IFP News Release
Backgrounder (3-pg PDF) March 17, 2011

IOWA CITY, Iowa — Iowa state and local taxes rank below the national average, Census data show.

The Iowa Fiscal Partnership released the findings today in a call with media. Peter Fisher, research director of the Iowa Policy Project, said the findings confirm trends that have been building for several years.

"We often note Iowa is in the middle of the pack on taxes, contrary to the claims of those who want to keep cutting taxes further. While that is true, on most measures, Iowa state and local taxes actually are below the national average for states and Iowa ranks in the bottom half of states,“ Fisher said. "And that is the case whether we're talking about a national or regional comparison.

“For those who believe taxes are important in business and individual decisions on where to locate, these findings should be an important tool to promote economic development in our state."

Fisher said the best way to compare tax levels between states is to measure taxes collected as a percentage of personal income. On that measure, the study notes, total state and local taxes in Iowa in Fiscal Year 2008 (latest data available) were 10.4 percent of income — half a percentage point below the national average — ranking Iowa 26th among all states.

"If Iowa taxed at the same rate as the average state (10.9 percent of personal income) an additional $532 million would have been generated in FY2008," the report stated.

In addition, Iowa taxes have declined more than a full percentage point since the early 1990s — from 11.5 percent of personal income in 1991-95, to 10.4 percent of personal income in FY2008. Over that period Iowa went from the 12th highest to the 26th highest tax level among the 50 states.

"The findings of this short report show how Iowa measures up on various taxes, which certainly is interesting. As we have often noted, however, the overall numbers are important comparisons to keep in mind for a comprehensive approach to any tax reforms," said Charles Bruner, executive director of the Child & Family Policy Center in Des Moines.

In the region, the report found all but two states had taxes higher than Iowa, with Wisconsin topping the nine-state region at 11.6 percent, followed by Minnesota (11.1), Kansas (10.9), Nebraska (10.7), Illinois (10.6) and Indiana (10.5). Iowa was next at 10.4 percent, followed by Missouri (9.3) and South Dakota (8.1).

The Iowa Fiscal Partnership is a joint public policy analysis initiative of two Iowa-based, nonpartisan, nonprofit organizations: The Iowa Policy Project in Iowa City and the Child & Family Policy Center in Des Moines. IFP reports are at www.iowafiscal.org.

 
A joint effort of the Iowa Policy Project and the Child & Family Policy Center (logos).