Iowa Ranks 40th for its Business Tax Climate: Tax Foundation

Date: December 16, 2015

State nearly last in corporate tax ranking.

It’s come to be expected that national tax reports won’t have a lot of good things to say about Iowa. The Tax Foundation’s latest report, released in November, ranked the Hawkeye State the 40th best in the country.

Other Tax Foundation rankings for Iowa, out of 50:

Corporate tax: 49th

Individual income tax: 32nd

Sales tax: 24th

Unemployment insurance tax: 34th

Property tax: 40th

Sky-high corporate income taxes remained Iowa’s greatest drawback in the 2016 State Business Tax Climate Index. Followed only by Delaware, the state ranked 49th for the fourth consecutive year in that category.

Several factors are to blame, according to the report. For one, Iowa has a graduated corporate income tax and doesn’t index its brackets for inflation. The federal government penalizes the state for failing to comply with its depletion schedules, and Iowa is one of the few states to impose an Alternative Minimum Tax (AMT) on corporations.

More significantly, “Iowa’s 12 percent corporate income tax rate qualifies for the worst ranking among states that levy one,” the Tax Foundation reports.

Iowa’s individual income tax score isn’t much more comforting. The state landed in 32nd place for featuring one of the highest top income tax rates in the nation (8.98 percent) and having a whopping 10 tax brackets.

Property taxes brought the state down, too: Iowa levies an intangible property tax, which the Tax Foundation says “can be highly detrimental to businesses that hold large amounts of their own or other companies’ stock and that have valuable trademarks.”

Here’s what changed between the 2015 and 2016 State Business Tax Climate Indexes.

The bad:

·      Average local sales tax rate increased from 0.78 percent to 0.79 percent

·      Taxable wage base increased from $26,800 to $27,300

·      Gasoline tax increased by 10 cents per gallon

·      All business-to-business cleaning services became subject to sales tax

The good:

·      Iowa scored well in the unemployment insurance tax category for having a minimum rate of zero percent

·      The maximum unemployment insurance tax rate decreased from 8 percent to 7.5 percent

Related Content: Small Business News | Economy | Iowa

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