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City income taxes in Iowa?
December 29, 2008
Here's an idea that will make you want to buy that house in the country: the Iowa League of Cities is asking the Iowa legislature to permit cities to impose municipal income taxes:
"I think it's a 30-year problem in search of a solution," said Sen. Joe Bolkcom, D-Iowa City, who is co-chairman of a legislative committee that will debate the idea.Bolkcom said he doesn't know how much support the idea will have but believes it is good option and a good tool to give cities.
The Iowa League of Cities will ask Bolkcom's committee to endorse the city income tax idea on Jan. 7.
What a terrible idea. Ohio allows cities to impose income taxes, and filing a bunch of City returns is enough of an annoyance to make anybody think twice of expanding there. Of course, it would also be another incentive to move out of a city - as if, say, Des Moines needed to lose more residents. Des Moines City Councilwoman Christine Hensley says thanks, but no thanks:
Des Moines City Councilwoman Christine Hensley said her city is not interested in levying income taxes. She said it would only drive Des Moines residents to the suburbs.
Iowa already has an inexcusably complex tax system with absurdly high rates. This proposal would just make things worse.
UPDATE: I've given the comment to this post a post of its own.
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Comments
As a tax practitioner in Ohio, let me tell you. City taxes are a nightmare.
In SW Ohio alone, we have 80+ taxing districts. Each with different filing rules; some tax stock option income, others do not; some allow NOL carryforwards, some do not; etc.
In addition, assume you are a contractor. You are required to withhold income taxes for each municipality you operate in. You are also required to file a city income tax return in each of those municipalities.
Once, I did a return for a foreman on a road crew. He needed 60 copies of his W-2 in order to record all of the city withholding's
I can only hope Iowa takes this on so that you folks will be just as business friendly as Ohio, "The Heart of it All".
Posted by: Gordon Gekko | December 30, 2008 10:06 AM
We can only hope that Iowa copies the Kentucky model. There are places in Kentucky where you have to file a city, county, and school board tax return all with the same information. 3 different forms with exactly the same information, all with $25 payments. It's ludicrous.
I hope that at least Iowa could standardize the districts if they go with this insanity. In Ohio, I've seen cities disagree with themselves on whether a location is in the city. If you call the Assessor's office they will say it's outside the city limits but the city's Tax department will insist that the location is in the city limits and they are able to tax it. You have to wait for the city to resolve the dispute to even know if you have a filing obligation.
What a fantastic idea! Maybe Iowa could just raise the corporate rate another couple percent and pass the money directly to the cities? They still have a lower rate than Ontario after all.
Posted by: Kirk Walsh | December 30, 2008 2:45 PM
To paraphrase the great PJ O'Rourke: giving municipalities income tax authority is like giving whiskey and car keys to teenagers. And handguns. And high explosives. And defective prophylactics.
The answer is not more income at the city and county level, it is less government at the city and especially county level.
Posted by: Chad | December 30, 2008 4:13 PM