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MEATHEADS FOR TAX RELIEF

March 01, 2006

The group "Iowans for Tax Relief" has a name that belies its purpose. It supports special interest carve-outs and corporate welfare tax subsidies that shrink the tax base and raise the rates on the rest of us. It also refuses to even consider eliminating the deduction for state income taxes in exchange for lower rates.

All of this gets the Iowa tax system great publicity. Earlier this week Iowa was listed by the Tax Foundation as having one of the ten worst tax environments for business, thanks in no small part to the work of Iowans for Tax Relief. Yesterday Iowa made another top-ten list, in a Wall Street Journal editorial titled "Meathead Economics." The print-version of the article included this little chart:

Iowa's listed right up there with glamorous states like New York, California, Hawaii and New Jersey.

Sure, the chart is unfair. If you consider the deductibility of federal taxes, the top effective Iowa individual marginal rate is 6.46% (or 6.026 if you are one of those rare Iowa taxpayers in the highest bracket but not subject to AMT). If we just lowered the rates and eliminated the deduction, 6.46% would get us out of the Meathead top-ten list, but thanks to Iowans for Tax Relief, there it is. (Some people say they don't trust the legislature to creep the rates back up. That's where a supermajority for tax increases or a Colorado-style taxpayer bill of rights comes into play). Maybe IFTR will consider changing their name to the more accurate "Iowans for Special Interest Loopholes and High Rates."

P.S.: Iowa's 12% top corporate tax rate is still #1. Thanks, IFTR!

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