Extension Communications
3614 Administrative Services Building
Ames, Iowa 50011-3614
(515) 294-9915
9/5/00
Contacts:
Kenneth Stone, Extension Economics, (515) 294-6269,
kstone@iastate.edu
Georgeanne Artz, Extension Economics, (515) 294-6271,
gartz@iastate.edu
Del Marks, Extension Communication Systems, (515) 294-9807,
delmarks@iastate.edu
ISU Study Looks at Potential Impact of Local Option Sales Taxes
AMES, Iowa - A recent study has discovered some of the potential implications from Iowa's Local Option Sales Taxes (LOST).
"Iowa's two Local Option Sales Taxes have the potential of transferring more than $1.1 billion from essentially rural counties to urban counties over the next 10 years," said Ken Stone, Iowa State University extension economist.
One of the factors contributing to this transferal of funds is the passing of the second LOST option in 1998. This tax is designated strictly for public school infrastructure and can be passed by a simple countywide majority of the vote. The tax can charge up to one percent of the sale and expires after 10 years unless voters wish to extend it. To date, 12 counties have passed this tax.
The retail situation throughout Iowa has changed dramatically from past years. Currently there are only 18 counties where the sales total more than county residents spend; the remaining 81 counties have a net leakage of retail sales. The sales in smaller, rural towns and counties have been experiencing a downward trend for the past several years.
The residents of the rural counties have no vote in whether the local option sales tax is passed in nearby metro counties. Nor do they have much choice of where to shop. Smaller communities cannot compete with the vast selection that the urban areas have to offer, Stone said.
"Consequently, the findings of the study show that a local sales option tax does not distribute the funds equally," said Stone. "It primarily takes from the residents of rural counties and gives to the residents of urban counties."
More information about the study can be found at www.econ.iastate.edu/retail.
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