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Tax facts and myths get mixed


The Iowa House of Representatives’ Ways and Means Committee approved a measure to lower the state’s personal income tax rates, and Iowans for Tax Relief, an influential Muscatine-based group, quickly praised the measure.

“States with low and no income taxes see significantly more growth than high tax states,” the organization said, citing the 2007 “Rich States, Poor States ALEC-Laffer State Economic Competitiveness Index” as a source of supporting data.

We took a look at the latest version of that report, which updates the statistics to 2010. We selected the nine states with no personal income tax and found a considerable variation in the economic performance ranking assigned to each, from No. 1 Wyoming to No. 32 Tennessee, which undercuts the argument a bit.

Then we totaled the property tax, sales tax and remaining tax, all calculated per $1,000 of income. Figured this way, Wyoming’s total tax burden equaled $102.05. Thirteenth-ranked Nevada came in at $102.14. Washington, at No. 14, had a tax burden of $105.07.

Iowa, which ranked a lowly 41st in economic performance, had a total tax burden of $75.79.

Using this recommended document as our text, should we argue that Iowa needs a higher tax burden?

Current pushes for lower taxes tend to include praise for the late President Ronald Reagan, crediting him with boosting the economy by lowering taxes. This claim also needs to be put in perspective.

Reagan did cut income tax rates early in his first term. In the following years, he raised personal income tax rates – more than once – raised corporate income taxes, raised the gasoline tax and raised Social Security taxes.

By the end of Reagan’s second term, the average American’s total tax burden had increased since his first day in office.

If we can lower spending, we can lower taxes. Just shifting the load around doesn’t help much.

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