An Iowa State University tax expert suggests legislators are fooling themselves if they think erasing state taxes on pensions will stop the exodus of seniors seeking sunnier climates. Iowa State University economist David Swenson says Arizona is the state which draws the most Iowa seniors, yet it taxes pensions just like Iowa does. “The research that we’ve done up at Iowa State and the research that I’ve read that’s been done over the last three or four years here in Iowa does not indicate that, in and of itself, the tax code is driving the elderly to other states,” Swenson says.
Swenson says the elderly look at other factors, like amenities, lifestyle, health care and even a whether other seniors are concentrated in the area and that leads them to places in Arizona, Texas, Florida and southern Missouri. But Representative Jamie Van Fossen, a Republican from Davenport, helped push a bill through the Iowa House that would gradually erase state taxes on pensions and Social Security income, and he’s convinced it will stop some seniors from moving out-of-state.
“We can talk about all the statistical analysis that we want to, the fact is people are leaving,” Van Fossen says. “These people spent their whole life planning for their retirement. You don’t think they’re going to take taxes into consideration? I think that’s the wrong assumption.” The exodus Van Fossen’s most concerned about is the Iowa seniors who across the border to Illinois or South Dakota, states which he says have more favorable tax climates. “The weather’s the same in Iowa and Illinois,” Van Fossen says. “On the east side of the river, they don’t pay taxes on their pensions. On the west side of the river, they do pay taxes on their pensions.” Van Fossen is calling upon the state Senate to vote on the House-passed bill that would erase state pension taxes.
But Senator Joe Bolkcom, a Democrat from Iowa City who is co-chair of the Senate’s Ways and Means tax-writing Committee, isn’t convinced that’s the way to go. “As Iowa continues to age the state budget, frankly, is going to rely more and more on older taxpayers,” Bolkcom says. “If we simply erase all the taxes that seniors pay in the state we will exacerbate our problem over time.” Bolkcom says Democrats in the Senate are trying to develop a tax cut targeted for low and middle-income seniors.