DES MOINES — Filing taxes in Iowa could be much easier, and a simpler tax code could benefit businesses in the state without reducing state tax revenues, according to a report published Thursday by a national tax policy think tank.
Commissioned by the Iowa Taxpayers Association and its sister group, the Future of Iowa Foundation, the 120-page report offers multiple ways Iowa could simplify its individual and business tax laws without reducing the amount of tax money collected by the state, which would jeopardize currently funded programs.
“Structure matters more than people realize. Often, people think it’s all about rates and collections,” Jared Walczak, a policy analyst for the Tax Foundation said Thursday after the report was unveiled at a news conference at Principal Park. “But having a pro-growth tax structure can be very important for a state, with the exact same revenue outlook.”
The report offers multiple plans that include a mixture of flat or simplified individual and corporate income tax rates and the repeal of federal deductibility and the inheritance tax.
Some of the proposed reforms would not affect state tax collections, while more aggressive plans would reduce tax revenue. The ones that remain revenue neutral rely on eliminating some or all tax incentives for businesses.
The report suggested such provisions, depending on how aggressive, could improve Iowa’s tax climate from 40th in the nation on the Tax Foundation’s State Business Tax Climate Index to at least 24th or as high as 10th.
The groups said the report can serve as background information and tax policy guidance for state lawmakers as they consider tax reform measures.
Jeff Smith, president and CEO of the Iowa Taxpayers Association, said he hopes that the report provides direction for legislators and that the fact some proposals are revenue-neutral will make tax reform more palatable.
“Our main goal is to educate (lawmakers) about what options we can do that structurally change our taxes and make it easier, simpler, fairer, doesn’t have to come at the expense of revenue,” Smith said. “That was one of the keys that we tasked the Tax Foundation with when we started it. We want to see options. …
“We understand with a split Legislature and with a budget that’s tight, that has been leaned up over the last four or six years, there’s not a lot of room to bring lowered rates at the expense of programs. So we wanted the Tax Foundation to put together these options that are revenue neutral that can still take us to an easier code that folks can understand, they know what they’re paying, they can predict what they’re going to pay.”
Smith said the report’s multiple proposals gives state lawmakers many options for tax policy changes, which he hopes increases the chances of tax reform regardless of political party control in the state Legislature.
The Tax Foundation spent six months interviewing taxpayers, business leaders and government officials throughout Iowa, Walczak said.