Iowa Ranks 8th in Average American Income Tax Rates, WalletHub Reports | national news
(The Center Square) – Iowa has the eighth highest tax rate in the nation, according to a WalletHub report published on Monday.
WalletHub compared state and local tax rates in all 50 states and Washington DC to national medians. He calculated relative income tax liabilities by applying each state’s effective tax rates to the average American’s income.
Assuming that the median annual US household income is $63,218 (median income of the third quintile in the US) with a home value of $217,500 (median home value in the US), a car worth $25,295 (Toyota Camry LE four-door sedan, the best-selling car in 2021), and the annual expenses of a household earning the median U.S. income, total and local effective tax rates of Iowa on the median US household are 13.19% ($8,337).
For the median U.S. household, Iowa’s effective vehicle property tax rate is 0.40% (29and lowest, $253), its effective tax rate is 2.89% (37and lowest, $1,828), and its effective sales and excise tax rate is 4.51% (29and the lowest, $2,850).
Iowa has the 12and the highest effective property tax on the median US household (5.39% $3,407).
Wallet Hub analyst Jill Gonzalez told The Center Square in an emailed statement on Tuesday that it was difficult to assess the national impact of the tax reform bill. Iowa Governor Kim Reynolds signed the law into law March 1.
“His goal is to have a flat tax rate for all Iowans, but that will have a bigger impact on high-income earners,” she said. “The effects will not be visible for at least 4 to 5 years, since the bill will be fully implemented by 2026. As part of our ranking, since we have calculated the effective tax rate on income as a percentage of income spent on income tax for middle-income earners, the effects will be minimal.In addition, Iowa’s overall tax rate is among the highest, primarily due to its high property taxes, apart from income tax.
She said WalletHub recommends Iowans assess their eligibility for property tax credits if they want to reduce the amount they pay.
Illinois has the highest overall tax rates, at 15.01% ($9,488). Wisconsin, Connecticut, New York, Pennsylvania, Kansas, Nebraska and Wisconsin also beat Iowa. Alaska (5.84% $3,694), Delaware (6.25%) and Montana (7.11%) tax the median U.S. household the least, the report said.
Iowa’s taxes on the median US household are 22.07% higher than the US average for state and local tax rates (10.80%).
However, WalletHub’s analysis based on Iowa’s median household income, home values, and expenses (with the car valued at $25,295) shows Iowa has the 21st highest annual state and local taxes.
Red states (based on voting records from the 2020 presidential election) tend to have lower taxes than blue states, according to the report.
Doron Narotzki, an associate professor of accounting at the University of Akron, said state and local taxes are only a small part of the company’s costs. The availability of skilled employees, proximity to customers and ease of shipping tend to be much more important, although these often depend on public investment from government agencies, he said.
“High state and local taxes are not necessarily a problem if used effectively and can in fact attract new residents and drive growth,” he said.