Local-option taxes blanket Iowa cities, counties

It's never been simple to convince voters here to back a 1-percent local-option sales tax, and next Tuesday's vote to extend Cedar Rapids' existing tax for 20 years to help build a flood protection system and fix streets is likely no sure thing.

Truth is, though, it's not that easy to find a spot in Iowa these days that doesn't have a 1-percent local-option sales tax in place.

In fact, some of the state's biggest cities, like Davenport, Sioux City, Dubuque and Council Bluffs, have had the sales tax in place for more than 20 years and have no “sunset” provision for the tax ever to expire.

According to the Iowa Department of Revenue, only 79 cities, 13 unincorporated named places and the unincorporated parts of seven counties do not now have the local-option sales tax in place among a total of 947 cities, 99 counties and 197 unincorporated named places. That's about 8 percent of the total.

The odd ducks in Iowa, in fact, are communities without the local-option sales tax, not those with the tax. And the oddest ducks remain the state's largest city, Des Moines, the county it is in, Polk, two neighboring counties, Dallas and Warren, and nearly all the cities in those counties.

Nearly two-thirds of the jurisdictions in the state without the local-option sales tax are in those three counties.

Closer to home, Coralville, North Liberty, unincorporated Johnson County and a few smaller places in the county declined putting the sales tax in place when Iowa City and other places in Johnson County did back in 2009.

Josh Schamberger, president of the Iowa City/Coralville Convention and Visitors Bureau, on Monday recalled the 2009 campaign to back the sales tax in Iowa City and Coralville and how the tax passed by a few votes in Iowa City and went down to defeat in Coralville - home to the state's second largest shopping mall - by a few votes.

Schamberger said the citizen committee advocating for the tax to help with flood recovery spent nearly all of its campaign money in Iowa City, sure the tax would pass in Coralville. “Coralville was a given,” he said the thought was.

Peter Fisher, research director for the Iowa Policy Project in Iowa City, said on Monday that it is understandable that so many cities and counties in Iowa have turned to the local-option sales tax to generate revenue for local projects in a state where he said the revenue-raising options for localities are all-but limited to property taxes. Only school districts in Iowa, he noted, can levy an income surcharge, which he said is a more progressive tax than the sales tax. The sales tax in Iowa, though, is less regressive than in some states because the tax is not collected on food or prescriptions, he added.

Cedar Rapids Mayor Ron Corbett said the Iowa Department of Revenue's data shows that communities in Iowa with the local-option sales tax in place are not at a “competitive disadvantage” because most cities in the state have the tax in place.

Corbett said most larger cities in Iowa have made peace with the local-option sales tax because they've found that the historic way for cities to take care of their streets - the state road-use-tax fund - doesn't generate as much revenue for cities as it once did.

The city of Cedar Rapids has had its current 1-percent local-option sales tax in place since April 1, 2009, and nearby Iowa City, since July 1, 2009.

By comparison, other of Iowa's largest cities have had the their current tax in place much longer: Waterloo, since April 1, 1991; Mason City, July 1, 1992; Clinton, Oct. 1, 1989; Burlington, Oct. 1, 1994; Dubuque, April 1, 1988; Newton, July 1, 2006; Marshalltown, April 1, 2000; Muscatine, July 1, 1994; Council Bluffs, April 1, 1990; Davenport, Jan. 1, 1989; Ames, Jan. 1, 1987; Ottumwa, July 1, 1998; Fort Dodge, July 1, 2009; Sioux City, Jan. 1, 1987.

Davenport uses 60 percent of its sales-tax revenue for property-tax relief and 40 percent for capital improvement projects; Dubuque uses 50 percent of its sales tax revenue for property-tax relief, 30 percent for streets and 20 percent for upkeep of city property; and Waterloo uses its sales tax revenue for street repair and reconstruction and construction of new streets.