Iowa: Who Pays? 7th Edition
Iowa
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All figures and charts show 2024 tax law in Iowa, presented at 2023 income levels. Senior taxpayers are excluded for reasons detailed in the methodology. Our analysis includes nearly all (99.9 percent) state and local tax revenue collected in Iowa. These figures depict Iowa’s 2024 graduated personal income tax, with a top rate of 5.7 percent, along with a top corporate income tax rate of 7.1 percent. By 2027, the income tax will reach a flat rate of 3.9 percent and the top corporate rate will be reduced to 5.5 percent. As seen in Appendix E, this will decrease the overall tax rate paid by the top 1 percent of households by 1.3 percentage points and cause the state to move 7 spots in the ITEP Inequality Index rankings, from 23rd to 16th most regressive.
State and local tax shares of family income
| Top 20% | |||||||
| Income Group | Lowest 20% | Second 20% | Middle 20% | Fourth 20% | Next 15% | Next 4% | Top 1% |
| Income Range | Less than $26,200 | $26,200 to $53,000 | $53,000 to $87,500 | $87,500 to $136,100 | $136,100 to $244,300 | $244,300 to $605,500 | Over $605,500 |
| Average Income in Group | $14,400 | $39,000 | $67,400 | $111,800 | $171,200 | $342,700 | $1,371,000 |
| Sales & Excise Taxes | 6.6% | 5.7% | 4.5% | 3.8% | 3.2% | 2.1% | 1.1% |
| General Sales–Individuals | 2.9% | 2.8% | 2.2% | 1.9% | 1.6% | 1% | 0.3% |
| Other Sales & Excise–Ind | 2.2% | 1.5% | 1.2% | 0.9% | 0.6% | 0.4% | 0.1% |
| Sales & Excise–Business | 1.4% | 1.4% | 1.2% | 1% | 0.9% | 0.7% | 0.6% |
| Property Taxes | 5.9% | 3.8% | 3.5% | 3.3% | 3.6% | 2.9% | 1.8% |
| Home, Rent, Car–Individuals | 5.3% | 3.1% | 2.8% | 2.7% | 3% | 2.1% | 0.6% |
| Other Property Taxes | 0.7% | 0.7% | 0.6% | 0.6% | 0.6% | 0.8% | 1.2% |
| Income Taxes | -1.1% | 1.7% | 2.4% | 3.5% | 3.7% | 3.8% | 4.2% |
| Personal Income Taxes | -1.1% | 1.7% | 2.4% | 3.4% | 3.7% | 3.8% | 4.2% |
| Corporate Income Taxes | 0% | 0% | 0% | 0% | 0% | 0% | 0.1% |
| Other Taxes | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% |
| TOTAL TAXES | 11.6% | 11.4% | 10.5% | 10.7% | 10.6% | 8.9% | 7.2% |
| Individual figures may not sum to totals due to rounding. | |||||||
ITEP Tax Inequality Index
ITEP’s Tax Inequality Index measures the effects of each state’s tax system on income inequality. According to this measure, Iowa has the 23rd most regressive state and local tax system in the country. Income disparities are larger in Iowa after state and local taxes are collected than before. (See Appendix B for state-by-state rankings and the report methodology for additional detail.)
Tax features driving the data in Iowa
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Graduated personal income tax structure, though top rate kicks in at $30,000 (single) so many families face top rate; scheduled changes will create a flat rate tax
Refundable Earned Income Tax Credit (EITC)
Refundable dependent care tax credit
Sales tax base excludes groceries
Levies a state inheritance tax
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Retirement income is scheduled to eventually be fully exempt from the personal income tax
No property tax “circuit breaker” credit for low-income, non-senior taxpayers
Real estate transfer tax does not include higher rate on high-value sales
Does not use combined reporting as part of its corporate income tax
Income tax deduction for pass-through business income
No Child Tax Credit (CTC)
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