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News
Study
Shows Who Pays More Taxes
Posted 14 November 2008
A new study finds that low-income
Iowans pay a bigger share of their incomes in state and local taxes
than do wealthy residents.
A recent study by the Iowa Policy Project, a nonpartisan, non-profit
policy research organization based in Iowa City, said the bottom 60% of
Iowa taxpayers pay roughly 10% of their income in state and local taxes.
Those in the top 1%, making more than $320,000 a year, pay 6.3% of
their income in state and local taxes, the study showed.
Christine Ralston, a research analyst for the group, pointed to a 10%
cut in income taxes approved in 1998. Since then, Iowa's state's sales
tax and cigarette tax have been increased.
"The state sales tax has doubled in the last 25 years while we have
made big cuts in income tax," said Ralston. "This is not a good trade
off if we want a tax system that better reflects a household's ability
to pay."
The group said it was basing its analysis on data from the
Washington-based Institute on Taxation and Economic Policy.
For low-income families making less than $16,000 a year, 7.3% of the
household income goes for sales and excise taxes. Those taxes consume
2% of those with household incomes about $127,000.
The report recommended that lawmakers once again expand the earned
income tax credit that goes to the working poor, as well as allow local
option income taxes to augment or replace local-option sales taxes. It
warned against any additional increases in the sales tax, which it
contends is the most regressive of taxes.
During the past session, the Iowa Legislature made permanent a
local-option sales tax for schools that had been approved in all 99 of
the state's counties.
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