With the full phase-in of the newly enacted reforms, Iowa would rank 15th overall, an improvement of 31 places. Before the reforms of 2018 took effect, Iowa ranked 46th overall on our State Business Tax Climate Index, a measure of state tax structure. 2317, builds on reforms adopted in 20, and is broadly consistent with recommendations made by the Tax Foundation in our 2016 guide to Iowa tax reform. Additionally-a more mixed bag economically-the state will exempt retirement income and certain farm rental income from taxation. Improvements have been made to the state sales tax base and several tax credits have been reformed. Once current reforms have phased in, Iowa will be able to boast a 3.9 percent single-rate individual income tax, a 5.5 percent flat corporate income tax, and no inheritance tax or alternative minimum taxes. In 2018, Iowa had a nine-bracket individual income tax with a top marginal rate of 8.98 percent and a graduated-rate corporate income tax with a top rate of 12 percent, both with alternative minimum taxes an inheritance tax and a well-intentioned but distortive policy of federal deductibility. The ongoing transformation of Iowa’s tax code is certainly remarkable. That’s less than half of what it was just four years ago.” Kim Reynolds (R) delivered the Republican response to the State of the Union Address on March 1, she touted a state tax reform package on which the ink was barely dry: “Today, I signed legislation that eliminates Iowa’s tax on retirement income and sets our tax rate at 3.9 percent.
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