Rick Morain is the former editor and owner of the Jefferson Herald, for which he writes a regular column.

Republicans who control the Iowa House, Senate, and governorship have made no secret of their intention to eliminate the state’s income tax entirely. This is unlikely to happen next year or even next, but the plan is now on track to succeed. If Republicans remain in power in Iowa for the rest of the current decade, we can probably expect the end of the income tax in Iowa by the late 2020s or sooner.

Although those rates have already begun to decline due to Iowa’s legislative actions in recent years, the state income tax still makes up a large portion of the state budget. In the 2022-23 fiscal year, it was 46.8 percent — nearly half of state revenue. That percentage is undoubtedly a bit lower now that the Legislature has reduced each state’s income tax rate to a flat rate of 3.8 percent next year, but Iowa still relies on billions of dollars from the state income tax for its budget.

Meanwhile, the Iowa Republicans’ 2024 election platform, which was adopted at this year’s Republican convention, states: “We demand the abolition of the property tax.” Although the platform points often only express the personal wishes of party members and not well-considered proposals for action, significant changes to the state’s property tax laws should not be ruled out in the coming years. (Editor’s note from Laura Belin: Iowa House Speaker Pat Grassley promised in his Aug. 23 email newsletter that House Republicans would make property tax relief “a priority” during the 2025 legislative session.)

If both the state income tax and the local property tax were eliminated or even significantly reduced, what revenue would be left to fund public education? There is only one main source: the sales tax.

I posed this question to Greene County’s two Republican representatives, State Senator Jesse Green and State Representative Carter Nordman, via email on August 4th.

Green responded 10 minutes later, and we’ve continued a lengthy and productive email thread ever since. He chairs the Senate Local Government Committee and also sits on the Senate Education and Appropriations committees, and is well positioned to understand and influence education tax policy.

As of this writing (August 23), I have not heard from Nordman. He may be on summer vacation or otherwise busy. He is chairman of the House Education Spending Subcommittee, which includes his responsibilities on the full Appropriations Committee. So, like Green, he has an influential position in the House, particularly on education tax policy. If he responds to my email, I will present his thoughts in a future column.

Green put it clearly: “Viewed from 30,000 feet up, Republicans generally tend to want only one form of consumption tax and no other forms such as income or property taxes.”

However, he also pointed out the problems with this approach: “In my view and that of most other Republicans, it would not be realistic to fund all local services through a sales tax, especially when education funding accounts for more than half of local and state budgets.”

Green aptly noted that excise/sales taxes can be very volatile. That’s why, he explained, essential services related to real estate are taxed the way they are, to cushion certain fluctuations in economic conditions. So he’s not in favor of eliminating the property tax, but he says he’s “100%” in favor of reducing it. “This is the number one issue on Iowans’ minds when I knock on their doors,” he wrote.

To accomplish this, Green said, significant property tax relief could be achieved through an expansion of the Local Option Sales Tax (LOST) and/or reform of the school formula.

The only tax Green wants to eliminate entirely is the state income tax, he wrote. He said that could realistically happen within about eight years. To do that today would require raising the sales tax rate to about 11 percent without changing the sales tax exemptions, he explained.

However, he wrote, “Due to our growing economy, sales tax revenues have increased very significantly, allowing us to reduce the income tax.” This means that as the state’s economy grows, this replacement can also be pushed forward.

If that’s the case — and economic analysts may disagree — the volatility Green noted could now kick in. Iowa ranks 31st in the nation in economic growth rate, and the decline in farm income this year will likely push us even lower.

Green added something that probably not many Iowans have thought about. “The reason Republicans have not yet raised the state sales tax to eliminate the income tax is because constitutionally we would have to spend three-eighths of that new penny on certain natural resources, which some fear would go toward acquiring public lands, which many Republicans don’t agree with. If we can figure out how to control the use of that money, that could be an option for Republicans.” (Editor’s note from Laura Belin: This is because of the Iowa Water and Land Legacy constitutional amendment that voters passed in 2010.)

In addition to the problem of sales tax revenue volatility, Republicans have also refrained from increasing the state sales tax because some of the money would have to be used for natural resource purposes, which could include increasing the state’s public lands.

On the issue of public school funding, Green advocated giving school districts more flexibility in how they spend their revenue. He would like to find a way to reduce the restrictions the state places on schools on how they spend their funds. It’s a philosophical position that is certainly widely debated, both in the Capitol and in the state, but it doesn’t address the question of where those funds come from.

All in all, I am grateful to Green for his presentation of the Republican position on tax policy in Iowa. I think he accurately reflects the views of most of his GOP colleagues with whom he works closely on tax policy in his committee positions.

The question Iowans must ask themselves is whether they would rather pay more sales tax and less income and property taxes, and how much more sales tax they are willing to pay. The answer will vary depending on personal income.

Wealthy people may be very happy to trade their current income and/or property tax revenue for a higher sales tax rate. For low- to middle-income Iowans, the opposite may be true, as their income and/or property tax bill is significantly lower than that of their wealthy neighbors.

Bottom line: As Iowa’s income tax declines and eventually disappears, Iowa’s sales taxes will rise if the state is to maintain essential public services at their current levels – not to mention modest spending increases from year to year.

Iowans will vote to decide whether they like the upcoming change in the tax mix.