Iowa finished 26th in a Tax Foundation analysis of tax rates levied on pass-through businesses.
Pass-through businesses are defined as sole proprietorships, partnerships or other firms whose owners are allowed to “pass” the businesses’ income through the individual income tax system. Such companies represent more than 50 percent of states’ private-sector workers, according to the Tax Foundation.
Iowa’s marginal tax rate for its pass-through businesses is 38.1 percent.
These rates represented the combined state and federal burden on pass-through companies, according to the analysis. Most of the amount these businesses pay is set by the federal government’s rules, but they also pay state taxes on individual income, which are highest in California and lowest in those states that don’t levy taxes on individual incomes.
The states without individual income taxes are Alaska, Florida, South Dakota, Texas, Washington and Wyoming.
Marginal Tax Rates for Pass-Through Businesses
|Rank||State||Marginal Tax Rates for Pass-Through Businesses|
|17 (tie)||West Virginia||39.2%|
|29 (tie)||New Hampshire||37.7%|
|45 (tie)||South Dakota||32.7%|