Iowa's income tax rate is now among nation's lowest
Add Axios as your preferred source to
see more of our stories on Google.

Iowa's income tax rate is now among the lowest in the nation, according to a new analysis by the Tax Foundation, a nonpartisan think tank.
Why it matters: Lower income tax rates mean more take-home pay for Iowans but less money for state services and programs.
Driving the news: Iowa's state tax returns are due at the end of this month.
- Tax Day, when federal income taxes are due, is April 15.
State of play: Iowa's individual income tax rate dropped to 3.8% this year, down from a top rate of 5.7% in 2024 and 8.53% in 2019.
- Iowa now has the seventh-lowest rate of 41 states and Washington, D.C., with individual income taxes, down from among the 10 highest rates in 2019.
Stunning stat: Iowa is expected to generate $600 million less in tax revenue this fiscal year than the previous year, according to the Iowa Capital Dispatch.
Zoom in: The state's income tax has been cut in stages, shifting from a tiered system to a single rate.
- Lawmakers say the reductions are part of a long-term plan to simplify the tax code and make Iowa more economically competitive.
Zoom out: California (13.3%), Hawaii (11%) and New York (10.9%) had the highest rates among states with an income tax, while Arizona and North Dakota (both 2.5%) had the lowest.
Caveat: Local taxes, some state-specific taxes in a handful of states, and a capital gains surtax on high earners in Minnesota are not included.
What's next: Some GOP lawmakers say they aim to gradually eliminate Iowa's income tax, joining nine states that do not have one.
