“Because in a form of perverse logic, they’re able to convince many people that a flat tax is a fair tax.” “One of the arguments that has been made-oftentimes in conservative circles-is that what we really need are to have flat taxes, where everybody pays the same rate. “Wealthier people want the top tax brackets lowered so that their taxes go down,” Swenson said. The wealthiest of Iowans rarely pay the full amount due to a loophole that allows them to itemize their federal tax payments from their state taxes, and those making about $50,000/year in 2019 were able to get theirs under a 4% rate. The effective, average rates paid are a little different, as Iowans take various itemizations to reduce their tax burden. In the 2022 tax year, a person making $15,687 annually-$7.54 per hour working full time, which is 29-cents higher than Iowa’s minimum wage of $7.25 an hour-has a tax rate of 4.14%, whereas a person making more than $78,435 annually has a rate of 8.53%. That’s what we consider fairness in a conventional discussion.”įor decades, Iowa has operated under a progressive tax system that determines how much filers pay based on their income level. “When we think in terms of what constitutes a fair tax, a fair tax-there are many criteria for them-but one of the criteria for a fair tax is that your tax liability increases as your ability to pay increases. “With regard to fundamental tax principles, a flat tax is not a fair tax,” he said. The Republican official said her plan would create a “flat and fair” system for Iowa taxpayers, a notion Swenson disagrees with. The tax proposal was a signature moment of Reynolds’ Condition of the State address on Tuesday. “You’re going to get a shifting of the tax burden away from the wealthy, towards the middle class and lower-income taxpayers as a consequence of this,” he said. Kim Reynolds’ proposal to create a 4% flat tax rate over four years would benefit higher earners, according to longtime Iowa State University economist Dave Swenson. Iowa’s proposed flat tax rate will have a major winner: The Rich.
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