Iowa’s top marginal individual tax rate in 2016 (8.98%) was higher than New York’s (8.82%). And, our rate was significantly higher than 6 other surrounding states with the exception of Minnesota. Wisconsin is taking a hard look at flat-tax proposal with the hope that it spurs efficiency, savings, and investments.
But I believe we could go one better. I would propose that we implement what is called the Fairtax on a state-wide level. The Fairtax is a consumption/retail sales tax paid only on new goods and services. Used items are not taxed. The tax rate will be set to replace existing tax revenues. Exemptions, credits, and deductions will be eliminated. Everyone pays the same rate and even the “underground” economy pays. There is no need to file a tax return, not even on a postcard. Iowa’s corporate tax rate would go to zero, inducing businesses to relocate here, while personal paychecks could see a 5-7% raise.