If flat is fair, raise the Iowa income tax

Iowans pay at least three different taxes. They pay property taxes, either directly or included in their rent. They pay sales tax when they buy items at stores or online. They also pay taxes on income.

When all taxes are included, the less you make, the more of your income you spend on taxes. Graph 1 above shows who pays what part of their income for all Iowa taxes.

When you break down that chart by type of state or local tax, the income tax is the only piece of the system that puts more responsibility on those most able to pay — those at higher incomes, as seen in Graph 2 above.

Gov. Kim Reynolds ignores these basics with the tax proposal she announced in her Condition of the State address.

The governor wants everyone to pay the same percentage of income in income taxes — “flat and fair,” she called it. Clearly her proposal would not make the whole Iowa tax system “flat,” but would actually skew an already unfair tax system further to the benefit of the highest earners.

There are many more problems with the governor’s proposals on taxes, both in terms of equity and in assuring that we can fund education, health care, public health, public safety and other needs.

Her plan to repeal income taxes on retirement income pits rich retirees against people living on Social Security, as the latter already owe nothing in state income tax. They also are often more likely to need public services for which funding — by the governor’s own admission — will be cut.

Her plans for new, drastic cuts in income taxes come on top of the hundreds of millions cut through legislation in 2018 and 2021, much of which has not even taken effect yet. Before we will have fully seen the bottom of the hole, the governor wants to start digging again.

This plan should fall flat because it is not fair, and because it does not respect or reflect Iowa’s traditional commitments to our families, our communities and our future.

David Osterberg, a former state representative from Mount Vernon, is a senior researcher at Common Good Iowa, a nonpartisan, nonprofit policy analysis and advocacy organization with offices in Des Moines and Iowa City. dosterberg@commongoodiowa.org

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