Iowa’s state and local tax burden rose in 2009

The combined state and local tax burden on Iowa taxpayers rose in 2009, a new study shows, defying a rare nationwide downturn in the measure.

The Tax Foundation reported Wednesday that Iowa's ranking among the states worsened from 32nd-highest in 2008 to 24th-highest in 2009.

The percentage of Iowans' income paid to state and local taxes rose to 9.5 percent in 2009 from 9.2 percent in 2008. The combined state and local tax rate for Iowa remained below the national average of 9.8 percent.

Iowans paid $3,688 per capita for local and state taxes in 2009, according to Tax Foundation estimates, compared to a national average of $4,160.

Study author Mark Robyn said the state and local tax burden nationally fell slightly from 9.9 percent of income in 2008 to 9.8 percent of income in 2009. Taxes shrank faster than income due to the economic slowdown, Robyn said.

New York, New Jersey and Connecticut had the highest state and local tax burdens, the study said, at around 12 percent of income. They were followed by Minnesota and Wisconsin, at around 11 percent of income. The lowest state and local burdens were in South Dakota, Nevada and Alaska.

Robyn emphasized that taxpayers shouldn't attribute changes in their state and local tax rate solely to their own state's tax collections. The group's calculations also include the amount of taxes state residents pay to other states. He said Alaska, for instance, is able to shift 80 percent of its tax collections to residents of other states by taxing production of oil.

More states are looking at increasing tax revenues by boosting taxes paid by out-of-state residents on things like resort homes and hotel-motel taxes. Robyn said the study is not an endorsement of state attempts to “export” tax burdens to other states. He said states can create many problems when they blatantly attempt to shift their tax burdens to other jurisdictions.

Of the total $3,688 Iowans paid in state and local taxes, $1,031 was paid to other states in 2009.

Iowa's economy was hit less hard by the 2009 recession than that of many others because of its strong agricultural and renewable energy sectors, one possible reason its tax rate did not go down with the national average.