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For Immediate Release
April 19, 2004

Iowa – Governor’s Proposed Budget Includes Tax Increases and Expansion of Sales Tax Base

For fiscal year 2005, Iowa’s Governor has recommended numerous changes to Iowa taxes, including, among others, expanding the sales tax to include additional services primarily supplied to corporations. 

The Governor’s plan recommends:

 Þ     continuing the phase-out of sales tax on fuel and metered gas for residential use;

 Þ     phasing in a 15% reduction in the sale tax rate, beginning January 1, 2006;

 Þ     increasing the cigarette tax by an additional 60 cents per pack;

   Þ    changing gambling tax rates;

 Þ     expanding the sales tax base to include additional services primarily supplied to corporation;  and

 Þ     requiring corporations to file combined reports for Iowa corporate income tax purposes.

For residential fuel and metered gas, the state sales tax decreased from 3% to 2%, effective January 1, 2004.  Local option taxes are not affected by the phase-out.

The additional revenue collected from the increase in the cigarette tax would go toward funding programs such as children’s health insurance, smoking prevention initiatives, substance abuse treatment, and long-term care for the elderly.

A bill has been introduced and passed the Iowa House of Representatives that will impose new wagering tax rates on gambling revenues of Iowa’s racetracks (a tax rate of 22% or 24%, dependent upon certain criteria) and riverboat casinos (a 22% tax rate).

The sales tax base would be expanded to include services such as accounting, consulting, engineering, and surveying.  Corporate entities would be most affected by this change.  Iowa already has a broad-based tax on most services.

The Governor is also proposing that current loopholes in the laws that permit some multi-state corporations to redirect profits to other states should be amended, thus eliminating the avoidance of paying Iowa corporate income tax.

If you would like additional information on this topic or have any questions, please contact Scott Cione, Business Development Manager (708) 352-3985.  E-mail scione@thesaltgroup.com


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