Over the last ten years, property taxes collected on a statewide basis for schools, counties and cities have increased over 60%, or over $1.7 billion dollars. Those numbers are truly staggering and the Legislature can’t afford to do nothing.
Residential property taxes will naturally increase in the coming years. Over the next 10 years, property taxes paid by homeowners will increase from $2.3 billion in 2012 to $3.9 billion in 2022 – a 73% increase. This must be addressed.
The 2010 Business Tax index ranked Iowa’s business tax climate 46th out of 50 states. Commercial property in Iowa is taxed at 100 percent of assessed value and is a major drawback to attracting and keeping businesses of all types and sizes.
Property tax reform has been studied and debated for the last 30 years. Now is the time to act. House Republicans have proposed a comprehensive plan with the following principles:
- Rollback commercial property taxes from 100% to 60% over an eight year period with small businesses seeing the greatest benefits first, then large businesses seeing the same benefits by year eight.
- Increase the regular school foundation formula from 87.5% to 100% over an eight year period. This will help mitigate or prevent any shift to residential and provides homeowners with dollar for dollar property tax relief.
- Aligns local government spending with the rate of inflation plus new growth. Local budgets would be tied to a Midwest CPI index, plus net new growth and closely align their spending with the income growth for those who pay for the services.
- Provide backfill dollars for local governments that don’t see growth, to help them adjust and allows local governments to exceed their budget by a vote of the people.
It is a bold plan, and one that if enacted would help spur growth, provide property tax relief to all classes of property while allowing local government budgets to continue to grow, albeit at a more sustainable pace.