![]() ![]() However, Forbes did not follow the standard methodology and divide the amount of tax paid by the total amount of income to determine the effective tax rate. Because of these variations, it is difficult to compare the effective state tax rates.įorbes’ ranking was based on the estimated effective tax rate for a full-time resident of a state filing as single with a gross income of $53,657. (Iowa uses the same tax tables for all taxpayers, regardless of status.) There is no nationwide standard number of deductions and exemptions available to state taxpayers. Many states set different rates for single and married taxpayers. Income tax rates in Indiana and Michigan are a fixed percentage of an individual’s federal adjusted gross income. States take various approaches to levying income taxes. But Iowa allows corporations to deduct federal taxes and does not tax all income on sales made outside the state, so the effective tax rate for a corporation is lower than the statutory rate. Iowa has the highest corporate income tax rate in the country, with a rate of 12 percent on income at or above $250,000. South Carolina has the lowest tax rate, with a rate of 0.0 percent on incomes of less than $2,920. Iowa’s lowest tax rate of 0.36 percent on income less than $1,539 is the second lowest rate in the country. The top individual income tax rate in California, Minnesota, and Oregon are higher than Iowa’s. Iowa’s top tax rate of 8.98 percent, for incomes at or above $69,930, is the fourth highest state individual income tax rate in the country, according to the Tax Foundation, a Washington D.C.-based think tank. Income level at which the tax rate applies Iowa state individual income tax brackets The state’s current rates were adopted in 1998. Įight states have a flat tax rate for all incomes. In Iowa, individual income taxes accounted for 37.8 percent of total tax revenue collected by the state that year. Census Bureau, individual income taxes accounted for 36.9 percent of the tax revenue collected by states in 2015. The term “effective tax rate” refers to the percentage of total income paid after standard deductions and exemptions have been used to reduce that amount to an individual's taxable income. Background: Iowa individual income tax ratesįorty-three states tax individual income. ![]() Chapman is correct about Iowa's ranking in the article, but the Forbes calculation did not follow standard methods of determining effective tax rates. Chapman told Ballotpedia his claim about Iowa’s income tax came from news reports and cited an article in Forbes, which ranked the state as the 10th highest, with an estimated effective tax rate of 5.68 percent. ![]() There is no official ranking of states’ effective tax rates, and such comparisons are often flawed because of the variances and complexities of tax codes. Is Chapman correct that Iowa has one of the nation’s highest effective tax rates? Speaking to The Des Moines Register, Chapman said Iowa has one of the nation’s highest effective tax rates, adding, “What we should be doing is looking at every opportunity to put more money into the pockets of hard-working Iowans.” ![]() Jake Chapman, R-Adel, wants to make lowering the state’s income tax a priority when the legislature convenes on January 9, 2017. The state capitol building in Des Moines, Iowa ![]()
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