State Implications of the One, Big, Beautiful Bill
As the US House hashes out its “One, Big, Beautiful Bill,” statehouse lawmakers are watching closely, given the impact of both its tax and spending provisions on state budgets.
12 min readIowa‘s tax system ranks 20th overall on the 2025 State Tax Competitiveness Index. Iowa’s Index ranking has improved substantially in recent years as the result of several rounds of pro-growth and structurally sound tax reform that have greatly improved the state’s competitive standing. Under recent reforms, Iowa has lowered income tax rates, eliminated an unusual and counterproductive policy of federal deductibility, repealed the alternative minimum tax, and begun the phaseout of the state’s inheritance tax.
While Iowa still has a graduated-rate individual income tax as of July 2024, the state will move to a single-rate structure in 2025, which will further improve the state’s overall score. Unusually, Iowa has a graduated-rate corporate income tax structure but has enacted tax triggers to reduce and flatten the rate over time as revenue becomes available. Iowa is also among the states that allow local income taxes.
While Iowa’s combined state and average local sales tax rate is slightly below average, the state’s property tax burden is somewhat high, and unlike many of its regional competitors, Iowa not only taxes tangible personal property (machinery and equipment) but does so without providing a de minimis exemption for small businesses. The state also has split roll property taxes, with higher ratios applied to businesses and renters than to homeowners. The state’s inheritance tax will be eliminated in January 2025, which will be reflected in next year’s edition of the Index.
Category | Rank | Rank Change | Score |
---|---|---|---|
Overall | 20 | -2 | 5.30 |
Corporate Taxes | 23 | -5 | 5.33 |
Individual Income Taxes | 19 | 2 | 5.62 |
Sales Taxes | 11 | -3 | 5.41 |
Property Taxes | 32 | -2 | 4.88 |
Unemployment Insurance Taxes | 33 | -3 | 4.67 |
As the US House hashes out its “One, Big, Beautiful Bill,” statehouse lawmakers are watching closely, given the impact of both its tax and spending provisions on state budgets.
12 min readAccording to the latest economic data from the US Census Bureau, the average per capita state and local tax burden is $7,109. However, collections vary widely by state, reflecting differences in tax rates and bases, natural resource endowments, the scale and scope of taxable economic activity in each state, and residents’ political preferences.
5 min readDoes your state have a small business exemption for machinery and equipment?
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