Group says Iowa’s taxes are just below average

Iowans' overall tax burdens are lower than the national average and six of the eight surrounding states, according to a report from the Iowa Policy Project.

Iowans pay out 10.4 percent of their total income in state and local taxes based on 2008 data, according to the report released Thursday, March 17. By that measure, Iowa's taxes are 26th-highest among the states.

The same measure ranks Iowa taxes lower than all neighboring states except Missouri and South Dakota. The percentage of personal income going to state local taxes among Iowa's neighbors ranged from a high of 11.6 percent in Wisconsin to a low of 8.1 percent in South Dakota.

The group's report on Thursday, March 17, is the latest to look at the hotly-debated issue of whether Iowans are overburdened by taxes at a time when Iowa Governor Terry Branstad is focused on cutting state spending and lowering them. A previous Iowa Policy report concluded that the state's taxes corporate income taxes as a percentage of private economic activity ranked 40th-highest among the states in the period from 2009 through 2009.

Report author Peter Fisher said the findings also indicate that state and local taxes have declined over the past decade, from 11.5 percent of state income in 1991-1995 to 10.4 percent in 2008. Iowa dropped from 12th highest nationall to 26th highest over that period.

The findings are not a big surprise, but differ slightly from findings of the Tax Foundation, a nationwide tax policy organization.

The Tax Foundation reported that Iowa ranks 26th in state and local tax burden per capita in fiscal year 2009, with a per-capita tax burden of $3,688. As a percentage of state and local income, Iowa state and local taxes were 24th among states.

The major difference between the two groups' studies is that the Tax Foundation incorporates payments state residents make to out-of-state governments, such as oil taxes imposed by the state of Alaska, into the taxes tallied in the taxpayers home state.