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ISU economist says Iowa’s tax structure is ‘relatively uncompetitive overall’

Peter Orazem

JOHNSTON — An Iowa State University economist says if G-O-P lawmakers intend to cut taxes again in 2022, there’s one tax that’s out of whack when it comes to attracting new businesses here.

“If you compare Iowa to its neighbors, it’s our property tax rates that are the most destructive when looking at, say, which side of a border new firms enter,” says ISU’s Peter Orazem

He has done research on the factors business owners consider as they examine where to locate. He says it’s probably counter productive to cut income taxes, as it’s likely to be done in tandem with a sales tax increase.  “If you’re starting up a business, you may not have an income and you may not have any sales, but you have to have property and you’re going to have to pay that tax right up front,” Orazem says.

Orazem also served eight years on the Ames City Council and he says it would make sense for state policymakers to take the pressure off property taxes and remove some of the constraints that prevent cities and counties from collecting other kinds of taxes.  “You look at Lincoln, Nebraska that paid for all this public entertainment space with an entertainment tax and we’re not allowed to have an entertainment tax in Iowa,” Orazem says. “I think that we have sort of made way too many restrictions on how local governments fund themselves and then put too much burden then on state support for those local efforts and that’s one of the reasons we have a relatively uncompetitive tax structure overall.”

Orazem made his comments earlier this month during an appearance on “Iowa Press” on Iowa PBS.


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