The business tax climate of Iowa is ranked 40th out of 50 states by the nonpartisan Tax Foundation, despite the fact that the Iowa legislature enacted property tax reform earlier this year.
Iowa just missed the Tax Foundation’s ranking of the 10 worst business tax climate states for the second year in a row.
This marks the third straight year that Iowa has been ranked near the bottom.
The lowest ranked states were Maryland (at No. 41), Connecticut (42), Wisconsin (43), North Carolina (44), Vermont (45), Rhode Island (46), Minnesota (47), California (48), New Jersey (49) and New York (50).
The top 10 with the best tax climate were Wyoming, coming in first, followed South Dakota, Nevada, Alaska, Florida, Washington, Montana, New Hampshire, Utah and Indiana.
Kristin Failor, Iowa state director for the National Federation of Independent Business, said Iowa’s ranking shows more significant tax reform needs to be enacted by the state’s lawmakers.
“We’ve got some competitors in our part of the country who’ve been very aggressive at cutting business taxes, and they still have an edge over Iowa,” Failor said. “The good news is that we have a bipartisan majority in Des Moines that understands the need for tax reform.
“Now we need to build on the progress we made in 2013.”
The Tax Foundation ranks states according to five categories. Iowa ranks 49th for its corporate tax, 38th for property taxes, 36th for unemployment insurance taxes, 32nd for its individual income tax and 24th for its sales tax.
“There’s a lot of room for improvement in these numbers,” Failor said. “There’s no reason that we should be at the bottom of the pile in almost every category.
“If we want businesses to locate in Iowa, stay in Iowa and grow in Iowa, we have to let them and their customers keep more of their money.”
Scott Drankard, Tax Foundation economist, said states that lost ground this year usually did so because they changed policy in a way that makes the tax code more complex, burdensome or economically harmful.
“By contrast, the states that improved did so because they are moved closer to a tax code that collects revenue without unnecessarily distorting business decisions,” Drankard said. “Their tax codes became more neutral.”