Iowa Tax Reform Options: Building a Tax System for the 21st Century

In the following pages, we examine Iowa’s economy, detail the state’s existing tax structure, and offer recommendations for reforming the tax code. We seek to identify what Iowa does well and to point out opportunities for improvement. Underlying our analysis is the goal of enhancing Iowa’s competitive standing and a commitment to the principles of sound tax policy—that, to the greatest extent possible, taxes should be simple, transparent, neutral, and stable, and that the best tax structures are those with broad bases and low rates.

In the course of our research, we poured over Iowa’s tax code, dusted off old tax studies, reviewed the economic literature, and examined successful reforms implemented by other states. First and foremost, however, we talked to Iowans—state and local government officials, business leaders, and everyday taxpayers alike. The insights and perspectives of those who actually interact with Iowa’s tax system inform every page of this book.

In the following pages, we provide background on Iowa’s economy and overall fiscal system (Chapter 1). We then review each major tax, outline concerns, and propose options for reform (Chapters 2, 3, 4, and 5). Chapter 6 examines additional tax considerations that fall outside of the four major tax types.

The Future of Iowa Foundation commissioned the Tax Foundation to prepare this review of the Iowa tax system and recommend possible solutions, and this book is the result. While they supported our study, they did not direct this or any of our recommendations. We offer our thanks to the many Iowans of all walks of life who met with us as we worked on this book.

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