(The Center Square) – Iowa’s state and local tax burden and deteriorating fiscal policy place it 34th in an index ranking state’s personal and economic freedom, the Cato Institute said.
The annual report from the libertarian think tank cites the state’s 11.9% tax burden on personal adjusted incomes. State taxes make up 6.9% and local taxes make up 4.25%.
“Even though the state has moved right in recent years, it is one of just a few states whose fiscal situation has deteriorated during the past decade,” according to the analysis. “As a result, its fiscal policy ranking has cratered. Not so long ago, Iowa was a top-10 state on overall freedom, but its competitive policy advantages have faded.”
Iowa spends more than average on public education, highways, hospitals and public buildings. The Cato Institute recommended the state reduce the spending and use it to reduce taxes.
The state’s spending accounted for 11.4% of the gross domestic product, a slight decline since 2000.
“Most other states have brought this metric down,” the Cato Institute said in its analysis. “Debt is quite low, however.”
Land-use freedom remains “better than average,” but the report said that other states have done more to address eminent domain by private companies.
The Cato Institute also recommends the state repeal its certificate-of-need requirements for medical facilities. The Pacific Legal Foundation is challenging the state’s certificate of need laws on behalf of two women who want to open a birthing center.
The State Health Facilities Council, which decides certificates of needs, is one of 111 boards to be cut if lawmakers approve. It is not known what will happen with the CON process.
The state’s educational freedom is high due to its tax-credit scholarship program. The analysis also cited the state’s school choice program enacted in 2023.
“However, private schools are tightly regulated, with mandatory state approval, teacher licensure, and detailed curriculum control,” the report said.
New Hampshire is ranked first in the Cato Institute’s report, followed by Florida and South Dakota.
New York received the lowest ranking, with Hawaii taking the 49th spot and California coming in at 48th.