Iowa's Tax Climate Gets A Failing Grade

Iowa stands out from our neighboring states as the only one to receive an overall "A" and that is something we should all be proud of. But the "F" in tax climate sticks out and really gnaws at us.

Iowa is one of five states to earn an overall "A" grade for the health of our manufacturing industry on a scorecard recently released by Ball State University.

While Iowa scored high in categories like logistics, human capital, and fiscal health, the state's only "F" is our tax climate; grades were assigned using a bell curve distribution.

The map below shows Iowa stands out from our neighboring states as the only one to receive an overall "A" and that is something we should all be proud of. But the "F" in tax climate sticks out and really gnaws at us. Few factors garner as much policy interest as do state and local taxes. To measure tax climate, Ball State looked at corporate, income, property, sales and use, and unemployment insurance tax data.

Image source: Ball State University 2020 Manufacturing Scorecard

If ITR were assigning grades to Iowa’s tax climate, we’d likely assign an “incomplete” rather than an “F”.

The legislature has passed, and Governor Reynolds has signed, significant property tax and income tax legislation over the past several years, some aspects of which are still being phased in. Much has been said by our elected officials about ensuring that progress continues and even during the COVID-impacted legislative session of 2020, both Governor Reynolds and the Iowa Senate proposed ways to improve our state’s tax climate.

Manufacturing is critical to Iowa's economic strength, and 2020 has shown that businesses can operate virtually anywhere. Iowa needs to address the state's high tax burden. Businesses, entrepreneurs, and individuals will vote with their feet and move to states with the best regulatory and tax climates.

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