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Iowa

The Facts on Iowa’s Tax Climate

Here are some basic facts on Iowa’s tax system and how it compares to other states:

Tax Freedom Day Arrives on April 16 in Iowa
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2008, Iowa taxpayers had to work until April 16 (ranked 34th nationally) to pay their total tax bill,  a week earlier than National Tax Freedom Day (April 23). The Tax Freedom Days of neighboring states are: Minnesota, April 27 (8th); Wisconsin, April 24 (14th); Illinois, April 23 (16th); Missouri, April 14 (36th); Nebraska, April 19 (25th); and South Dakota, April 12 (41st).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
Full study of Tax Freedom Day, nationwide and in each state

Iowa’s State/Local Tax Burden Matches National Average in 2007
Between 1980 and 2001, Iowa’s state/local tax burden was consistently higher than the national average. Today, estimated at 11.0% of income, Iowa’s state/local tax burden percentage matches the national average and ranks 18th nationally. Iowans pay $4,085 per capita in state and local taxes on per-capita state income of $37,068.
Iowa's State-Local Tax Burden, 1970-present

Iowa’s 2008 Business Tax Climate Ranks 43rd
Iowa ranks 45th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. The ranks of neighboring states were as follows: Minnesota (42nd), Wisconsin (39th), Illinois (28th), Missouri (15th), Nebraska (43rd), and South Dakota (2nd).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth Edition (full study)

Iowa’s Individual Income Tax System
Iowa's personal income tax system consists of nine brackets with a top rate of 8.98%, kicking in at an income level of $60,435. That top rate ranks 5th highest among states levying individual income taxes. Iowa's 2005 individual income tax collections were $780 per person, which ranked 23rd highest nationally.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

Iowa’s Corporate Income Tax System
Iowa's corporate tax structure consists of four brackets with a top rate of 12%, kicking in at an income level of $250,000. That top rate is by far the highest corporate income tax rate in the nation. In 2006, state-level corporate tax collections (excluding local taxes) were $95.56 per capita, which ranked 41st highest nationally.
50-State Table of Corporate Income Tax Rates, 2000-2008
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

Iowa Sales Slightly below National Median
Iowa levies a 5% general sales or use tax on consumers, which is slightly below the national median of 5.4%. State and local governments combined collected approximately $1,068 per capita in sales taxes in 2005, which ranks 40th nationally. Iowa's gasoline tax stands at 21.7 cents per gallon and ranks 33rd highest nationally. Iowa's cigarette tax, which was recently raised by $1, stands at $1.36 per pack of twenty and ranks 19th nationally. The sales tax was adopted in 1933, the gasoline tax in 1925 and the cigarette tax in 1921.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

Iowa Property Taxes Fairly High
Iowa's local governments collected $3,188,869,000 in property taxes during fiscal year 2002, which is the latest year available from the Census Bureau. Iowa is one of the 13 states that collect no state-level property taxes, meaning its per capita property tax collections equaled $1,080 for all levels of government in FY 2004, ranking it 18th nationally.
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Iowa is a Beneficiary State
Iowa taxpayers receive more federal funding per dollar of federal taxes paid compared to the average state. Per dollar of federal tax collected in 2005, Iowa citizens received approximately $1.10 in the way of federal spending. This ranks the state 24th nationally and represents a rise from 1995 when Iowa received $1.06 per dollar of taxes in federal spending (then ranked 26th nationally). Neighboring states and the amount of federal spending they received per dollar of federal taxes paid were: Minnesota ($0.72), Wisconsin ($0.86), Illinois ($0.75), Missouri ($1.32), Nebraska ($1.10), and South Dakota ($1.53).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

Publications from The Tax Foundation