Get Educated

Stay up to date with email updates
Uncategorized

Changes in Iowa’s Boomer Population

posted on July 1, 2017

By Jennifer L. Crull

Iowans are very focused on the future and what it holds.  A big issue facing our state is the loss of population.  In two major area: recent college graduates taking a job in their field outside the state and the retirees.  While we would like to see graduates stay in Iowa, it is great for them to experience what the world has to offer, and then move back to Iowa once they wish to start a family.  Retirees are choosing a more tax friendly state and living there over 50 percent of the year to change their residence to that state.  When they go, Iowa loses a lot more than taxes and their incomes.

In 2010 retirees age 65 and over made up 13.1 percent of the total U.S. population, but by 2050 this percentage will increase to 20.9 percent.[1]  In Iowa that percentage is projected to be 19.9 percent of the total population.[2] As this segment grows we need to focus on keeping this group of people in our state.  You may wonder why we should focus on this segment of the Iowa population?  The question is fairly simple, but the answer is a little more complex to answer.

First let’s take a look at the lost revenue for the state.  The website How Money Walks, points out that in the span of 1992 to 2015, Iowa has lost over $4.61 billion in adjusted gross income in the state.  Imagine how much better off the state would be if they had tax revenue from the lost $4.61 billion? Where is this money going?  The following states are the big winners:

  • Florida – $985.15 million
  • Minnesota – $496.34 million
  • Arizona – $481.51 million
  • Texas – $462.42 million
  • South Dakota – $437.08 million[3]

That is just one part of the puzzle, the next is the loss of sales tax dollars.  A report done by the Iowa Department of Revenue on State Tax Policy Implications of an Aging Population from 2006, pointed out that annual state sales tax per household for 65 plus is $648.[4]  That number was from 2006 and we know that average has only gone up per household.  Another reason this group has a huge impact on sales tax revenue is that this group is less likely to purchase online.  A Pew Research Center report from 2017, pointed out that only 67 percent of people age 65 plus are online.[5] That means that the state can collect all the state sales tax dollars that the 65 plus group spends.

Another issue is the loss of resources to our cities, schools, and businesses.  Retirees are the resources that cities and counties use for board positions, running for city council, and volunteering in schools.  These individuals are the ones that are engaged in the highest percentage of volunteer activities in our communities.

Iowa has worked to retain retirees by exempting all Social Security benefits for tax year 2014 forward.  This change was phased in over eight years to exempt 100 percent for Social Security benefits.[6]  This move was made to help retain retirees in Iowa.  This had helped increase the ranking of Iowa as a state to retire to.  Bankrate.com rated Iowa number 4 in the 2016 ranking of Best States to Retire in. When you look where Iowa rates concerning taxes it is 20th on the Bankrate.com rankings.[7]  Which means there is more we can do to help retain our retirees.

The Iowa Legislature needs to work to lessen tax impacts on our retirees.  A married couple can exempt $12,000 of their pension income but in today’s economy $12,000 isn’t much. Our state should work to let all our retirees retain more of their income, since they will then spend it in their communities and contribute to the sales tax revenue.

Jennifer L. Crull is IT Specialist with Public Interest Institute. 

The views expressed herein are those of the author and not necessarily those of Public Interest Institute or Tax Education Foundation.  They are brought to you in the interest of a better-informed citizenry.

[1] Sandra L. Colby and Jennifer M. Ortman, “The Baby Boom Cohort in the United States: 2012 to 2060,” U.S. Census Bureau, May 2014, <https://www.census.gov/prod/2014pubs/p25-1141.pdf> accessed on June 26, 2017.

[2] “Older Iowans: 2017,” State Data Center of Iowa and Iowa Department on Aging, May 2017, <http://www.iowadatacenter.org/Publications/older2017.pdf> accessed on June 27, 2017.

[3] “Iowa Data,” Howmoneywalks.com, < http://www.howmoneywalks.com/irs-tax-migration/> accessed on June 28, 2017.

[4] “Issue Paper: State Tax Policy Implications of an Aging Population,” Iowa Department of Revenue, February 2, 2006, <https://tax.iowa.gov/sites/files/idr/IssuePaper1-AgingPopulation.pdf> accessed on June 29, 2017.

[5] Monica Anderson and Andrew Perrin, “Tech Adoption Climbs Among Older Adults,” Pew Research Center, May 17, 2017, < http://www.pewinternet.org/2017/05/17/tech-adoption-climbs-among-older-adults/> accessed on June 28, 2017.

[6] “Social security benefits to be fully exempt from 2014 Iowa state taxes,” Aging WatchIowa Department of Aging, December 23, 2014, <http://publications.iowa.gov/19346/1/AgingWatch_Dec%202014_0.pdf> accessed on June 29, 2017.

[7] Claes Bell, “Where are the best and worst states to retire?,” Bankrate.com, June 12, 2017, <http://www.bankrate.com/retirement/states-ranked-from-first-to-worst-on-retirement-2/> accessed on June 28, 2017.