Tax Foundation ranks Iowa 39th in annual state property tax rankings

(The Center Square) — Iowa dropped a spot in the business property tax rankings this year for the first time since at least 2019.

It now ranks 39th in the property tax component of the Tax Foundation’s State Corporate Tax Climate Index. The property tax component assesses state and local taxes on real estate and personal property, net worth, and asset transfers.

Tax Foundation senior policy analyst Katherine Loughead told The Center Square in an emailed statement on Tuesday that she expects Iowa’s tax competitiveness to improve as recent tax reforms adopted by the State would come into force. For example, while Iowa’s estate tax hurts its tax competitiveness, this measure will improve once the tax is completely removed in 2025.

“Iowa’s property tax system is not neutral in that it shifts a disproportionate share of the burden onto commercial properties while giving preferential treatment to agricultural and residential properties,” she said. declared. “Despite this, Iowa has an above-average effective property tax rate on owner-occupied housing and above-average property tax collections per capita, which hurts Iowa’s score on the property tax component of the index.”

Iowa fares worse in this category than most Midwestern states. Indiana has the best business tax climate in terms of property taxes. Ohio ranks sixth. Missouri is eighth and North Dakota is 10th. Iowa does better than Nebraska (40th) and Illinois (48th).

State and local property taxes are among the largest tax burdens for businesses across the country, according to the report.

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“Although property taxes tend to be unpopular with the public, a well-structured property tax is generally consistent with the benefit principle (the idea in public finance that taxes paid should be related to benefits received) and is more transparent than most other taxes,” the report said.

Taxes on intangibles, wealth and asset transfers are harmful, however, according to the report.

“States that levy such taxes—including taxes on capital stock, taxes on inventory and intangible property, and inheritance, inheritance, gift, and transfer taxes on real estate—are less attractive on economically, because they discourage investment and encourage businesses to make choices based on the tax code that they otherwise would not,” the report said.

“Companies with valuable trademarks may seek to avoid having their headquarters in states with taxes on intangibles, and shipping and distribution networks may be shaped by the presence or absence tax on inventory.”

The 2022 State Business Tax Climate Index report was released in December 2021. The property tax component accounts for approximately one-eighth of the index score.

Penny D. Jackson