The Tax Foundation

Iowa

The Facts on Iowa’s Tax Climate

Last updated July 1, 2009

Here are some basic facts on Iowa’s tax system and how it compares to other states:

Tax Freedom Day Arrives on April 4 in Iowa
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2009, Iowa taxpayers had to work until April 4 (ranked 39th nationally) to pay their total tax bill, nine days earlier than National Tax Freedom Day (April 13). The Tax Freedom Days of neighboring states are: Minnesota, April15 (9th); Wisconsin, April 3 (12th); Illinois, April 13 (15th); Missouri, April 6 (34th); Nebraska, April 8 (31st); and South Dakota, March 29 (47th).
Full study of Tax Freedom Day, nationwide and in each state

Iowa's State/Local Tax Burden Below National Average
Over the past 20 years, Iowa's state and local tax burden has fallen from 10.6% of income (ranked 9th highest in the nation) to 9.3%, ranked 31st nationally, below the national average of 9.7%. Iowans pay $3,589 per capita in state and local taxes.
Iowa's State-Local Tax Burden, 1977-present
Other States' State/Local Tax Burdens
Historical Chart Comparing All States' State/Local Tax Burdens from 1977 to 2008

Iowa’s 2010 Business Tax Climate Ranks 46th
Iowa ranks 46th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. The ranks of neighboring states were as follows: Minnesota (43rd), Wisconsin (42nd), Illinois (30th), Missouri (16th), Nebraska (33rd), and South Dakota (1st).
50-State Comparison of Business Tax Climates (data only)
2009 State Business Tax Climate Index, Sixth Edition (full study)

Iowa's Individual Income Tax System
Iowa's personal income tax system consists of nine brackets with a top rate of 8.98%, kicking in at an income level of $63,315. That top rate ranks 7th highest among states levying individual income taxes. Iowa's 2006 individual income tax collections were $838 per person, which ranked 26th highest nationally.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

Iowa's Corporate Income Tax System
Iowa's corporate tax structure consists of four brackets with a top rate of 12%, kicking in at an income level of $250,000. That top rate is by far the highest corporate income tax rate in the nation. In 2007, state-level corporate tax collections (excluding local taxes) were $109 per capita, which ranked 40th highest nationally.
50-State Table of Corporate Income Tax Rates
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household
50-State Table of State Corporate Income Tax Collections Per Capita

Iowa Sales Tax at National Median
Iowa levies a 6% general sales or use tax on consumers, which is the same as the national median. State and local governments combined collected approximately $767 per capita in sales taxes in 2006, which ranks 35th nationally. Iowa's gasoline tax stands at 22 cents per gallon and ranks 31st highest nationally. Iowa's cigarette tax, which was recently raised by $1, stands at $1.36 per pack of twenty and ranks 20th nationally. The sales tax was adopted in 1933, the gasoline tax in 1925 and the cigarette tax in 1921.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales Tax Collections Per Capita and Per Household
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita

Iowa Property Taxes
Iowa's local governments collected $1,144.35 in property taxes during fiscal year 2006, which is the latest year available from the Census Bureau. Iowa is one of the 13 states that collect no state-level property taxes. The state’s per capita property tax collections rank 21st nationally.
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Iowa is a Beneficiary State
Iowa taxpayers receive more federal funding per dollar of federal taxes paid compared to the average state. Per dollar of federal tax collected in 2005, Iowa citizens received approximately $1.10 in the way of federal spending. This ranks the state 24th nationally and represents a rise from 1995 when Iowa received $1.06 per dollar of taxes in federal spending (then ranked 26th nationally). Neighboring states and the amount of federal spending they received per dollar of federal taxes paid were: Minnesota ($0.72), Wisconsin ($0.86), Illinois ($0.75), Missouri ($1.32), Nebraska ($1.10), and South Dakota ($1.53).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

 

Related Blog Entries