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Engage Iowa seeks improvements to state tax code

Cedar Rapids Mayor and President of Engage Iowa, Ron Corbett, speaks on Iowa state tax reform at the Creston Rotary Club meeting Monday.
Cedar Rapids Mayor and President of Engage Iowa, Ron Corbett, speaks on Iowa state tax reform at the Creston Rotary Club meeting Monday.

Cedar Rapids Mayor Ron Corbett introduced his new non-partisan, non-profit think tank, Engage Iowa, to the Creston Rotary Club Monday at Greater Regional Medical Center.

According to Corbett, Engage Iowa “exists to present research-based issues of importance to Iowa, to offer pragmatic and common sense solutions and to foster an exchange of ideas about the problems and solutions.”

Monday’s presentation by Corbett focused on the modernization of Iowa’s standing income tax code which is “outdated, confusing and expensive, leaving Iowa families with fewer jobs, lower pay and less opportunity.”

An Engage Iowa income tax research policy paper, produced in combination with Iowa State University’s departments of economics, finance and agribusiness, reveals that “Iowa’s marginal personal income tax rate of 8.98 percent is fourth highest among US states.”

Where other states such as Florida, Arizona and South Dakota have higher rates of sales tax, Iowa still garners much of its public funding from the taxation of its workers’ incomes.

“What this means,” Corbett said, “is our state is losing our ability to keep people and wealth here and attract people to our state.”

Engage Iowa’s research reveals that business owners and wealthy individuals are relocating to states with better business tax reputations such as Florida, Arizona, South Dakota and Texas, among others. Because of this, Iowa had a net outflow of nearly $4 billion to other states from 1992 to 2013.

“This means money that doesn’t stay in our state, that doesn’t turn over to help our economy and create jobs, and it’s not money that stays to be taxed to support our schools and other government infrastructure in our state,” Corbett said.

Corbett pointed out that Iowa’s income tax return form is only three lines shorter than the federal income tax return form.

“We have one of the most complicated tax forms and systems in the whole country. It isn’t fair, it isn’t competitive and it isn’t simple. It’s hurting our state in the long run in our ability to attract and retain people and it costs our citizens a lot of money,” Corbett said.

“Other states tax consumption (sales) more and income less,” Corbett added.

One focus of Engage Iowa is to support and accelerate the implementation of Iowa’s Nutrient Reduction Strategy, a science and technology-based framework to assess and reduce nutrients to Iowa waters and the Gulf of Mexico. A relatively simple way to push this project forward would be to implement an increase in our state sales tax.

One tax modernization scenario proposed by Engage Iowa’s income tax research policy paper “includes raising the sales tax by 1 percent and plowing 5/8 of that revenue into reducing the income rate. Iowans overwhelmingly decided with a constitutional amendment referendum that the balance of any sales tax increase, 3/8 of a cent, should go to protect and enhance our natural resources.”

Corbett said, “With this we can both modernize our tax code and provide enough money for farmers to afford implementing the Nutrient Reduction Plan on their own land.”

“Our system needs to be fair, our system needs to be competitive and recognize that we compete with other states for people and resources,” Corbett added.

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