Historic Property Tax Relief Passes the House – Again

House File 2274, which provides over $1.2 billion dollars in property tax relief to all classes of property from FY 15-FY 22 passed the House on a vote of 59-40. The Non-Partisan Legislative Fiscal Bureau estimates that over the eight year phase in:

  • Residential property taxpayers would see a $416 million decrease
  • Commercial/Industrial/Railroads would see a $602 million decrease
  • Agriculture would see a $147 million decrease
  • Utility/Other would see a $39 million decrease

In addition, the House Republican bill provides backfill dollars to local governments to help them adjust, thus preventing any shift among property classes.

The bill has four divisions – below are some of the highlights:

Division I – Education Finance:

Bill increases the state’s portion to the foundation levy from the present 87.5% to 100% over eight years beginning in FY 2015. This is important to help equalize the tax rate between property rich districts and property poor districts. Once it is fully implemented, the PTER fund would not be needed any longer.

This is dollar for dollar property tax relief. Depending on what the allowable growth percentage is, this is a reduction in property taxes from $430 million to $500 million.

Division II – Property Tax Exemption and Assessment Limitations – Property Tax Replacement

This division sets a commercial/industrial/Railroad rollback of 5% over an eight year period. In addition the bill provides and accelerated relief for small businesses. This takes effect in Assessment Year 2013, Fiscal Year 2015.

This division brings equity into the property tax code for commercial and Industrial property.

Division III – Telecommunications Property Tax

This division inserts the Telecommunications property tax reform piece into the bill. This modernizes the Iowa Tax code for an industry that is rapidly changing to provide better service technology to their customers. They are one of the last to pay property tax on personal property.

Division IV – County and City Budget Limitation:

Property taxes are growing faster than the property tax payer’s ability to pay. This is not sustainable and explains why property taxpayers are asking for relief. Property tax dollars spent by governments have grown 66% since 2001, during this same time period household income has increased only 46%. There is no relief in sight; in fact if nothing is done this will only get worse as the amount residential taxpayers are paying increases. Limiting the growth of government at all levels and permitting taxpayers to keep more of their hard earned money is good policy and an economic driver.