Iowa Policy Project calls for hiking tax credits if sales tax increased

IOWA CITY — Researchers at an Iowa City-based think tank say policy-makers should consider how raising the state sales tax to finance water quality projects would impact low-income Iowans.

“Sometimes that’s being left out of the equation and we think that we can improve the environment in Iowa and make sure that low-income families are not being disproportionately impacted,” said Natalie Veldhouse, a researcher for the Iowa Policy Project.

If state officials hike the sales tax by one percent to raise money for water quality improvements, the Iowa Policy Project proposes raising tax credits that benefit the working poor and low income renters. David Osterberg, lead author of the Iowa Policy Project report released today, supports increasing the sales tax.

“We need more funding for water quality,” Osterberg said. “Water quality needs help in the state of Iowa, but how we do that matters.”

According to Osterberg’s calculations, the poorest two-fifths of Iowans would pay an extra 124 dollars per year if the sales tax goes up one percent. He said boosting the state Earned Income Tax Credit and a renters’ credit would help offset that.

In 2010, Iowa voters approved a new state trust fund exclusively for water and land conservation as well as outdoor recreation, but legislators have balked at increasing the state sales tax to fill the account.