Moderate-and low-income Iowans are paying more of their income in state and local taxes than the rich, according to a report released today by the Iowa Fiscal Partnership (IFP).

According to the report, Iowa families earning less than $20,000 pay 11 percent of their income in state and local taxes. In comparison, Iowans earning between $37,000 and $56,000 pay 10 percent of their income in state and local taxes, and Iowans with income averaging $989,200 pay 7.4 percent. A federal tax deduction for state taxes further drops the top-level payment to 6 percent, while low-income taxpayers see no benefit.

“No one would ever design an income tax with lower tax rates for the best-off taxpayers,” said the lead author of the report, Matthew Gardner, executive director of the Institute on Taxation and Economic Policy (ITEP) in a press release. “But that is exactly what Iowa’s tax system overall does: It allows the very wealthiest individuals to contribute less of their income, on average, than middle- and lower-income families must pay. In other words, Iowa has an unfair, regressive tax system.”

The IFP said the new report demonstrates the need for personal income-tax reform, which it said was discussed in 2009 but never came to a vote in the Iowa General Assembly.

The report shows inequities by type of tax, with sales and excise taxes taking 6.5 percent of low-income budgets, 4.5 percent at middle incomes, and less than 1 percent from the highest earners. The report shows that Iowa relies on a regressive tax system of sales, excise taxes and property taxes. Income tax, however, is progressive, with low-income earners paying little in income tax, middle income earners paying 3.1 percent, and top earners paying 4.8 percent.

“These reports confirm that while the income tax is the only progressive tax in Iowa’s mix, it could be improved to lessen the overall unfairness of Iowa’s tax system,” said Charles Bruner, executive director of the Child & Family Policy Center in Des Moines in a press release.

The report focuses only on taxes as a share of income of non-elderly taxpayers.

“One of the good things about this ITEP analysis is that it doesn’t look at the source of income, because that should not matter,” said Peter Fisher, research director of the Iowa Policy Project. “At the same time, by focusing only on non-elderly taxpayers, it understates the inequities of Iowa’s personal tax structure, which has a very significant slant toward persons with retirement income. It doesn’t make sense that two households making the same income are treated differently for tax purposes, but that is the system we have.”

See the full release at www.iowafiscal.org.