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Johnson County is unique among Iowa's 99 counties in having never passed a local option sales tax anywhere in the county. By law, voters in a county can approve up to one cent for cities and the county, and a separate penny for schools; the majority of counties have approved both. The total sales tax rate here is 5 percent; in most of the rest of the state it is 7 percent.

Johnson County voters have shown they are supportive of schools and public services, but they have problems with the sales tax because of its regressivity. A sales tax takes a larger percentage of the incomes of lower income households than of higher income households. The best analysis of the sales tax in Iowa was done by the Institute on Taxation and Economic Policy in 2003. Their report showed that the poorest 20 percent of Iowa families (average income $7,900) paid about 5.7 percent of their income on the sales tax, while the richest 20 percent of Iowa families (average income about $123,000) paid only about 2.5 percent of their income.

The principal alternative given us by state law is the property tax. The property tax also is regressive, but less so. The same study showed that the lowest 20 percent of Iowa families paid 3 percent of their income on property taxes while the richest 20 percent paid about 2.5 percent of their incomes -- not that much difference between the top and the bottom, but still regressive.

In dollar terms, the poorest 20 percent probably would pay about $60 more a year if we added a penny to the sales tax, and probably about $50 with an increase in the property tax that would raise the same amount of money. These are only rough estimates; there are a lot of underlying assumptions. Still, it is pretty clear that the dollar amount of tax is not much different for the poorest families.

Use of the sales tax instead of the property tax would give a free ride to absentee owners of rental property, manufacturing facilities or office and retail buildings. They wouldn't have to pay more property taxes, and they presumably don't shop here. Their tax relief would come in part at the expense of people living in surrounding counties who do come here to shop. But lower income Johnson County residents probably wouldn't feel much difference one way or the other.

There is a progressive alternative to sales and property taxes: a local surcharge on the state income tax. The Iowa City, Clear Creek, Solon and Lone Tree school districts already use this surtax, but state law restricts the uses and the level of this tax. All four districts are at or near the limit. Those opposed to regressive taxes should be pushing the state to give school districts flexibility to use the school income tax to finance new school construction. Then we could support the schools without putting more of a burden on lower income residents.

In the meantime, given the options we have, supporting construction of more schools through the sales tax or the property tax is pretty much a toss-up when it comes to the impact on the poor. The important thing is to fund our schools adequately.
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Peter Fisher research director for the Iowa Policy Project.