The Iowa Department of Revenue reports 1,451 fees are imposed and collected by the State of Iowa. The taxpayers of Iowa may not necessarily be aware of the many fees that exist. Most Iowans are aware of fees that we pay on a regular basis such as vehicle registration or plate fees (county fee) or hunting and fishing licenses that are used to enjoy Iowa’s rich outdoor heritage. Most of the 1,451 fees listed are for some form of service, regulation, licensure, or to provide public safety and protection. The danger of fees is that they may be raised to avoid raising taxes. The Iowa Supreme Court usually tries to protect taxpayers from fees used to generate revenues, but a constitutional amendment is needed to provide more concrete protection for taxpayers. A taxpayer protection amendment requiring a supermajority vote of the Legislature to raise any fees or taxes would help protect the interests of the taxpayers of Iowa.
Although taxes and fees both represent money coming into the State of Iowa they are different. The Tax Foundation provides a definition of a tax and a fee:
- Taxes are imposed for the primary purpose of raising revenue, with the resultant funds spent on general government services.
- Fees are imposed for the primary purpose of covering the cost of providing a service, with the funds raised directly from those benefitting from a provided service.
In fact, fee increases can be a sneaky way for the state Legislature to avoid raising taxes. Joseph Henchman, Vice President for Legal and State Projects at the Tax Foundation, wrote: “Elected and appointed officials, who face the dual reluctance to raise taxes and cut spending, are increasingly turning to a strategy of hiding increased tax burdens through subterfuge: any number of contortions to deny that even an obvious tax is a tax.”
“They label them user fees, fines, surcharges, revenue enhancements, special assessments, and so forth. For an elected official, the best tax can be one that raises lots of money without anyone noticing or, at least, anyone calling it a tax,” stated Henchman.
In the fiscal year 2017, the Department of Revenue reported, at the time of this writing, that $21,001,126.07 in fees collected, which was down from $26,465,992.33 in the fiscal year 2016. Most of the fees collected by the various agencies of the State of Iowa fit into broad categories of agriculture, business and finance, and transportation. Public health, Professional Licensing Bureau, and Natural Resources also have several fees related to their respective agencies or divisions.
An examination of the 1,451 state fees demonstrates how much government is involved in not just economic affairs, but also in our daily lives. Most fees collected by the State of Iowa are used for a particular purpose, to promote public safety and well-being of Iowans, or to pay for certain services or activities. The goal of this article is not to attack all fees as being overbearing, but to draw attention to another fiscal aspect of state government that is often forgotten except by those who must pay the fees. Plus, the cost of fees is often passed onto the consumer. Also, fees should not interfere with market competition by making it more difficult for individuals or businesses to compete.
Fees, just as with taxes, should be fair and transparent. Also, taxpayers must be aware that fee increases need to be watched just as carefully as tax increases. This is another reason why Iowa taxpayers deserve protection in the state Constitution. Taxpayers in Iowa should be protected from both tax and fee increases by a constitutional amendment requiring any tax or fee increase to be approved by a supermajority vote of the Legislature.