A new report shows Iowans pay less in state and local taxes compared to the national average. Peter Fisher, research director for the Iowa Policy Project, says Iowa’s tax levels have declined “fairly significantly.”
Fisher says state and local governments in Iowa are taking a smaller percentage of Iowans’ personal income compared to the early 1990s. In Fiscal Year 2008, which is the latest data available, state and local taxes represented 10.4%. That compares to the national average of 10.9% and places Iowa 26th among all states. Iowa taxes represented 11.5% of personal income in the early 90s.
“I think the bottom line is, contrary to what some people have said, taxes in Iowa actually have declined in the past 20 years,” Fisher said. “We are not a high tax state. We are actually taxing somewhat below the average.” Fisher’s report is based upon the total taxes collected based as a percent of personal income.
“I think that’s the best, most justifiable measure,” Fisher said. “When you think about it, people pay taxes out of income and the best summary measure of tax level across the state is what percent of that income goes to pay state and local taxes.” The only neighboring states that rank lower than Iowa’s 10.4% tax rate are Missouri (9.3%) and South Dakota (8.1%).