A new report suggests changes to state's tax system.
Would These Reforms Make Iowa More Business-Friendly?
Iowa could use some major tax reform.
That’s according to The Tax Foundation, which
recently released a report
suggesting how the Hawkeye State could improve its tax code and ultimately help
its economy. The suggestions, which are sure to be controversial, include:
Reducing individual income
tax rates. Iowa’s income tax
discourages new residents from moving into the state, according to the report.
The authors recommend eliminating many of the currently available tax credits,
which would allow lawmakers to reduce the income tax rate. That would offer a
much larger benefit than the tax credits currently do, the report claims.
Broadening and simplifying
sales taxes. The report suggests
exempting business-to-business purchases from taxes, but applying sales taxes
to services like museum admissions, veterinary services and amusements,
consumer purchases of professional services, rental housing, healthcare
services, and higher education expenses. It also urges clearer regulations and
advice on sales tax administration.
Repealing the inheritance
tax. The tax “disadvantages some heirs more than
others” and imposes “substantial tax burdens on the transfer of property,” the
report says.
Other suggestions in the report include:
repealing the alternative minimum tax, making the state’s
Section
179 exemption
level permanently conform to the federal level,
and standardizing filing and deadlines for local property taxes to help
businesses with property in multiple cities.
As it stands, Iowa taxes are hard on small
businesses. The state ranks 40th overall in the
Tax Foundation’s 2016 State Business Tax Climate Index. In the individual
categories, Iowa ranks 40th in property taxes, 34th in unemployment insurance
taxes, 24th in sales tax, and 32nd in individual income taxes.
