Iowa Republicans are talking up a potential increase to the state’s sales tax in order to pay for natural resources and outdoor recreation programs.
Both Iowa Senate President Charles Schneider, R-West Des Moines, and House Majority Leader Chris Hagenow, R-Urbandale, told the Greater Des Moines Partnership at a legislative issues luncheon on Monday they believe the sales tax increase is being seen more favorably by state lawmakers than it was previously.
“Every year that seems to build a little more momentum,” Hagenow said, acknowledging the general public approves of moving ahead on the issue.
Recall that just six months ago, Iowa Republicans passed the largest tax cut in the state’s history, cutting income taxes and corporate taxes, cuts that overwhelmingly benefit the wealthy:
The changes in Iowa’s tax code will end federal deductibility, create sales taxes on digital goods and services and reduce both individual and corporate income taxes.
A married couple with two children making $96,000 can expect to save $347, or 8 percent.
Tax filers whose adjusted gross income is more than $1 million per year will see a 19.4 percent savings — a savings of $24,636 on average.
Six months ago, when Iowa Republicans cut income and corporate taxes for the wealthy, they also included a new sales tax on digital goods. And now, they’re talking about increasing all sales taxes. This is what always seems to happen when Republican politicians cut taxes for the rich: they replace that lost revenue with increases to sales taxes, gas taxes, tolls, and fees, which are paid disproportionately by the poor and middle class. This is why there are so many states that now have regressive tax burdens, where the poor and middle class end up paying a higher percentage in taxes than the rich:
- The vast majority of state and local tax systems are inequitable and upside-down, taking a much greater share of income from low- and middle-income families than from wealthy families. The absence of a graduated personal income tax in many states and an overreliance on consumption taxes contribute to this longstanding problem.
- The lower one’s income, the higher one’s overall effective state and local tax rate. On average, the lowest-income 20 percent of taxpayers face a state and local tax rate more than 50 percent higher than the top 1 percent of households. The nationwide average effective state and local tax rate is 11.4 percent for the lowest-income 20 percent of individuals and families, 9.9 percent for the middle 20 percent, and 7.4 percent for the top 1 percent.
- Tax structures in 45 states exacerbate income inequality. Most state and local tax systems worsen income inequality by making incomes more unequal after collecting state and local taxes. Five states and the District of Columbia somewhat narrow the gap between lower- and middle- income taxpayers and upper-income taxpayers, making income slightly more equitable after collecting state and local taxes.
- In the 10 states with the most regressive tax structures (The Terrible 10), the lowest-income 20 percent pay up to six times as much of their income in taxes as their wealthy counterparts. Washington State is the most regressive, followed by Texas, Florida, South Dakota, Nevada, Tennessee, Pennsylvania, Illinois, Oklahoma, and Wyoming.
- Heavy reliance on sales and excise taxes are characteristics of the most regressive state tax systems. Six of the 10 most regressive states derive roughly half to two-thirds of their tax revenue from sales and excise taxes, compared to a national average of about one-third. Seven of these states do not levy a broad-based personal income tax while the remaining three have a personal income tax rate structure that is flat or virtually flat. A calculation of effective sales and excise tax rates finds that, on average, the lowest-income 20 percent pay 7.1 percent, the middle 20 percent pay 4.8 percent and the top 1 percent pay a comparatively meager 0.9 percent rate.
- A progressive graduated income tax is a characteristic of the least regressive state tax systems. States with the most equitable state and local tax systems derive, on average, more than one-third of their tax revenue from income taxes, which is above the national average of 27 percent. These states promote progressivity through the structure of their income taxes, including their rates (higher marginal rates for higher-income taxpayers), deductions, exemptions, and use of targeted refundable credits.
- States commended as “low-tax” are often high-tax for low- and middle-income families. The 10 states with the highest taxes on the poor are Arizona, Florida, Hawaii, Illinois, Indiana, Iowa, Oklahoma, Pennsylvania, Texas, and Washington. Six of these are also among the “terrible ten” because they are not only high-tax for the poorest, they are also low-tax for their richest residents.
When Republican politicians cut taxes for the rich, they rarely end up just cutting taxes. Instead, they usually end up shifting the tax burden from the rich to the poor and middle class. This is class warfare, and with the help of Republican politicians, the rich is winning.