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Working Together to Achieve Property Tax Reform

This week was the first legislative funnel. This is a self-imposed deadline that the legislature sets to help narrow bills – all non-money bills must clear a House committee by Friday in order to remain alive for the rest of the year. Those bills that do not survive the funnel are eligible to be debated again next year.

An updated list of bills that remain eligible will be available later today.

While much attention was given to the funnel this week, two bills of great importance to Iowans began working their way through the process but did not receive much attention.  The governor’s property tax bill and the House Republicans’ property tax relief and reform bill both cleared subcommittees this week.  They are now eligible to be considered by the full Ways and Means committee.

For over a decade, property tax reform has eluded legislatures.  Last year, the Senate Democrats, House Republicans and Governor Branstad set out to come to resolution on Iowa’s property tax problem.  Once again, real reform and relief was not accomplished.  As we begin the debate on property taxes this year, the need for change is growing more desperate.

Now is the time for relief

  • If we do nothing, the hardworking taxpayers of Iowa are staring down the barrel of a $2.6 billion property tax increase over the next 10 years, with the majority of that falling to homeowners.  Homeowners have been and will continue to be shouldering much of the burden as the rollback turns into the roll up.
  • Property tax reform affects Iowa’s economy and the lack of it is an impediment to putting people back to work.  Our uncompetitive property tax system is a burden on job creators and prohibits businesses of all sizes from expanding, hiring or even settling in Iowa.
  • ALL Iowans deserve to see relief in their tax bill.  Additionally, we must not shift the burden to any other class of property. As local governments increase their collections by $2.6 billion, the average growth for all classes of property will increase by 4.4 percent each year.   It is the Legislature’s job to ensure property tax relief is permanent, predictable and significant.

Proposals on the table

House Republicans’ proposal is a simple, modest approach to start a larger discussion about relief and reform. The plan:

  • Holds harmless property taxpayers anytime the state sets supplemental state aid (formerly known as allowable growth) funding.
  • Eliminates additional property tax levies associated with supplemental state aid, reducing the share of money that is put on the backs of Iowa property taxpayers.  On average, this would save Iowa taxpayers $2.70 per $1,000 in property valuation when fully implemented.
  • Is supported by: the Iowa League of Cities, Iowans for Tax Relief, and the Iowa Farm Bureau.

Governor Branstad’s proposal takes into account concerns for hurting cities’ revenue while offering close to $400 million in relief once fully implemented.  The plan:

  • Contains a 20% rollback of taxable value on commercial and industrial property
  • Assessment growth limitation moves from 4% to 2% on ag and residential taxes immediately, while keeping the ag & residential tie in effect.
  • After the 20% commercial rollback is fully implemented, all four classes of property (Ag, Residential, Industrial, and Commercial) are tied together with a 2% assessment growth limitation.
  • Includes a standing unlimited appropriation to backfill revenue loss to local governments.

Senate Democrats’ proposal is similar to their previous proposals and includes a tax credit on commercial property taxes.  The plan:

  • Is a $250 million tax credit once fully implemented.
  • Taxes commercial properties valued at $324,000 or less the same as residential properties.
  • Only operates when the state has a revenue growth greater than 4 percent.

If this General Assembly is going to be successful at property tax relief and reform, there must be willingness to come to the table with new ideas and be open to discussing various options.  To that end, House Republicans are not drawing lines in the sand on this issue.  Instead, we remain committed to achieving relief and reform that is permanent, predictable, significant, and affects all classes of property.


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