I have written extensively about tax reform in the past. Some know that taxes and the tax culture in Iowa are one reason I ran for the District 1 State Representative position. When tax policy is done right, the growth and equity abound, but when tax policy is backwards, it stalls growth. I wanted to point out some very pertinent data to show where Iowa is at because I have been questioned on the reasoning for tax reform in Iowa.
The statistics I will use come from the Tax Foundation 2021 State and Business Tax Climate Index. These sources compare the State of Iowa to the other states in the United States. The big one that I am concerned about is the State-Local Tax burden per Capita and as a Percentage of Income. This measure should be low, and the higher it is, the higher percent of your income you are paying to state and local taxes.
Iowa is ranked 38th in the nation, which is very poor. On average an Iowan pays 10.8% of their income to state and local taxes. In my mind that is a huge dollar amount because for every 100 dollars you earn, you pay back $10.80 to the state and local governments. To put it in perspective, Alaska is the lowest at 5.8%, and so we are nearly double the amount.
State Business Tax Climate ranks Iowa as the 40th overall ranking. This means that when businesses look at Iowa, they see only 10 others states that have a worse tax climate for businesses. The best overall climate in the nation is Wyoming.
The two tax climates that I have already talked about make Iowa a tough state to move to. We are not competitive with our neighbors, and if a business or individual were interested in moving to the Midwest, they would likely look at other locations.
Iowa offsets the business tax climate with tax credits and other means, but I assert that we should collect taxes and then offer incentives to certain businesses to entice them to our great state. Why not just lower the levy that is paid to make us more competitive with other states? If we were just to lower our rates and get rid of the incentives (which make us more competitive), then we aren’t choosing winners and losers, and we are letting the free market reign.
We are working hard at getting out of Des Moines and back home, but we are looking at a variety of tax reform proposals that will make Iowa a more competitive state and one that will let you keep more dollars in your pocket. I will never forget that tax dollars are your dollars, not the government’s dollars to waste away. My hope is we will have some good news in the future that lets you spend your hard-earned money instead of giving it to the State. I do not forget that the state and local governments offer many good services and protections, and they all take money, so we will never get away from taxes or some form of revenue to the government, but we can get better about how we do it.
