Report: Iowa ranks 22nd in state and local tax collections

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(The Center Square) – Iowa’s state and local tax collections are the 22nd highest in the U.S., according to a report from the Tax Foundation.

According to the nonpartisan organization, the state collects $5,934 in combined taxes per capita. The analysis is based on tax collections for the fiscal year 2021. Still, with changes during the pandemic and the years after, the organization also looked at fiscal year 2023, which ended in June.

State revenues as a whole climbed 10% in 2021 when adjusted for inflation, according to the Tax Foundation. Those numbers are expected to decline in 2023.

“But this should not be alarming. Partly, it is a reversion to the mean: state revenues skyrocketed, and it’s okay for them to level off or even decline a little, as long as the new totals remain higher (in real terms) than before,” the organization said in its report. “Additionally, almost every state has adopted tax cuts since the start of 2021, including 25 that have cut individual income tax rates since then.”

Iowa is one of the states that reduced income taxes. Gov. Kim Reynolds signed a bill in 2022 that would gradually reduce income taxes until tax year 2026, when a 3.9% flat tax is enacted for all taxpayers, regardless of income. According to the bill’s fiscal note, the change would return $1.2 billion to taxpayers in fiscal year 2026.

Reynolds said this week on social media she is planning more tax cuts.

“Bidenomics is eating into the pockets of Iowans,” said in a post on X, the social media site formerly known as Twitter. “I’m tired of it. Iowans should keep more of their hard-earned money. And next year, we will provide income tax relief.”

The District of Columbia collects the most state and local taxes at $13,278 per capita, according to the report. New York was second at $10,266, followed by California at $9,175.

Alaska, which has no state income or sales tax, had the lowest rate at $4,192 per capita.

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