Delivering significant property tax relief to the hardworking taxpayers of Iowa has been one of our top priorities since gaining the Majority three years ago. Each year we have passed numerous proposals to the Senate, but unfortunately have not been able to reach a consensus. I am optimistic that this will be the year for true reform.
This week the House passed a comprehensive tax relief proposal that provides significant property tax relief across Iowa and helps reduce Iowans’ income taxes. The bill, SF 295, does not shift the tax burden between classes of property, but instead ensures that relief and reform is permanent, predictable, meaningful, and affects all classes of property. If no action is taken on property tax relief, Iowa’s taxpayers 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.
Under our current state tax structure, residential property taxpayers pay approximately half of Iowa’s property taxes. While our proposal provides property tax relief across all classes of property, residential property taxpayers would benefit the most under this plan.
Currently, in terms of K-12 school funding, the state covers 87.5% of the school foundation formula. The remaining amount needed for our schools to operate falls on the backs of local property taxpayers. Our proposal increases the amount of state aid going to our schools and decreases the reliance on local property taxes. As a result, local property taxpayers will be protected from future tax increases.
Our proposal would also implement a 20 percent rollback of taxable value on commercial and industrial property, which would occur over a period of four years, at five percent each year. This would provide approximately $339 million in property tax relief when fully implemented. Additionally, our plan would include a standing unlimited appropriation to backfill lost revenue from the rollback to local governments.
As previously mentioned, the bill also aims to reduce Iowans’ income taxes by giving individuals a choice to file under the current system or to use a 4.5 percent flat tax option. This legislation makes Iowa’s tax system simpler, flatter, and fairer. Under this proposal, each taxpayer is given a choice that will enable them to do what makes the most sense for their own household budget.
Finally, our proposal would send dollars back to Iowa taxpayers that have been collected in the Taxpayer Trust Fund. Only after the Legislature and Governor have agreed to a final budget that meets the priorities of Iowans and funds the state’s obligations, any excess revenue would be returned to Iowa’s hardworking taxpayers.
SF 295 passed the House with bipartisan support and was sent back to the Senate for their consideration. We look forward to continuing this discussion, listening to all ideas and proposals, and are hopeful a resolution will soon be reached that provides much-needed and real tax relief to all Iowans.
If you are planning a trip to the Capitol in the coming weeks, I would love to see you! Feel free to contact me anytime at firstname.lastname@example.org or 515-281-4618 to schedule a visit or to make me aware of any issues you care about.