January 15, 2013

Iowa Fiscal Partnership: Putting Fairness First: Questions for Financing State and Local Government in Iowa

ITEP Work in Action

As state legislators close out the 2008 legislative session and confront the tasks of maintaining commitments and investing in Iowa’s future, they will have to deal with a basic question: How is the budget gap to be financed?

Each financing decision has a different set of consequences for Iowans at different income levels. This means that, when answering the question of how to finance important state programs during a budget shortfall, it is crucial to remember a basic principle of taxation: fairness.

It is also important that a tax system include a combination of each type of tax — property, sales, individual income and corporate income — since each relies on a different revenue stream that will respond differently to economic growth and decline. Diversity in tax sources adds stability to the revenue stream. Tax systems should also maintain a level playing field for all taxpayers by not distorting economic decision-making or allowing tax avoidance through leaky seams in the tax code.

Read the Full Report (PDF)