Research Archives for 2018

A special federal tax break for business income claimed for personal income tax purposes is complicated, poorly understood, and costly — and now it’s being considered by Iowa state lawmakers.

While sales tax has remained important to state and local revenues, tax policy in Iowa has not kept up with changes in the economy, particularly with online and remote sales. The Governor’s tax plan would modernize that element — but other changes could ease Iowa’s overall regressive tax structure.

The proposed expansion of Iowa’s 529 program adds administrative complexity, reduces revenue for other needs, and disproportionately benefits high-income families.

The plan includes some desirable reforms that need not have come at the expense of essential public services that inevitably will have to be cut in the face of revenue losses. It also omits reforms that could enhance Iowa tax fairness. 

Governor Kim Reynolds’ tax proposal trades massive cuts in public services for small savings for lower-income taxpayers, larger savings for high-income taxpayers and few meaningful strides toward fairness in a system that already treats the poor poorly and raises too little revenue to avoid mid-year cuts.

Iowa is already competitive on its tax policies.

Overall the Senate plan would erode revenues, create structural budget deficits for years to come, and force cuts certain to imperil Iowa’s basic infrastructure and traditionally accepted responsibilities for its residents.

Despite chronic revenue shortfalls that have forced a series of mid-year budget cuts, senators are moving a tax-cut bill forward without even an analysis of its impact.

Neither fairness nor adequate funding of state services appear to be the focus of either bill, but let’s give serious analysis a chance.

Iowa’s lucrative research subsidy cost Iowa taxpayers $66.1 million in 2017, with very large companies once again the biggest beneficiaries and taking at least $38 million in checks from the state without paying any state income tax.