Fighting the Property Tax War

Combating Runaway Property Taxes

Recent headlines in Central Iowa are focused on an upcoming round of real estate assessments for properties in Polk County. Long-time Polk County assessor Randy Ripperger estimates that residential assessments will increase by 22% next year. We doubt Polk County residents will be the only Iowans experiencing a large jump in their assessed values. 

Countless Iowans will be angry about the increasing assessments because they believe they’re going to lead to higher property taxes. And while larger property tax bills may be on the way, the assessors are not the ones to blame. Property tax bills are determined solely by how much money local elected officials decide to spend. 

If you want to see for yourself, grab the property tax bill that arrived in your mailbox last month and flip it over. On the back side of the property tax statement, you’ll see the total amount of property taxes levied by the various taxing authorities like your school district, city, and county. It even helpfully illustrates the change in those total taxes from the prior year.

Learn how you can get involved in the process to slow the growth of property tax in your county.

Avoiding “Tax Shifts” for a Taxpayer Win

Politicians’ talk about tax relief doesn’t always mean the taxpayer wins in the end. Not all tax relief is created equally, as a comparison of Iowa with its neighbor to the west will show.

Iowa enacted historic tax reforms in March that significantly cut income taxes and reduced taxpayers’ liability. This change was possible because the state had been prudent with its dollars. Iowa did not increase spending, has fully funded reserves, and is experiencing a billion-dollar budget surplus. That is what a taxpayer victory looks like.

In Nebraska, the government has taken a different track that has not translated into a true reduction in taxes for many citizens. In 2020, Nebraska enacted a property-tax relief program. However, this program has many shortcomings. The largest issue is it’s merely a tax shift requiring income and sales taxes to make up the additional revenue. 

There are many things for Iowa officials to contemplate when figuring out how to best deliver property tax relief in the coming years. Leaders can look to our neighbors to the west for a list of “don’t do’s” when formulating taxpayer-friendly policy.

Removing the Mental Health Tax Burden From Counties

In 2021, Governor Kim Reynolds and the Iowa Legislature worked to address high property taxes across the state with the passage of a measure which realigned the mental health funding system from local counties to the state budget. This resulted in a large property tax savings for Iowa counties. It was left up to local county officials to pass on that savings to taxpayers.

In the latest policy brief, Removing the Mental Health Tax Burden from Iowa Counties, ITR Foundation Research Director Sarah Curry, DBA reviews the history of the mental health levy in Iowa, provides an overview of the removal of the county mental health property tax levy, assesses the results of the policy change, and evaluates how it affected Iowans across the state.

Here are some of the highlights:

  • Iowa counties are no longer tasked with funding mental health services in fiscal year 2023 (FY23).
  • Forty-eight counties did not pass along the full amount of mental health savings the state provided to taxpayers.
  • Floyd, Davis, Sac, Washington, Worth, and Hancock Counties made the largest increases to their levy rates when factoring in the elimination of the mental health levy.
  • Taylor, Wayne, Madison, Hardin, Mills, and Van Buren Counties made the largest cuts to their property tax levy rates when factoring in the elimination of the mental health levy.

Click here to check out the full report.

Lessons Learned From Iowa Tax History

At the end of the 19th Century, Iowa levied property taxes on just about everything from real estate and homes, but also jewelry and other personal property, household goods, and intangibles such as mortgages, bonds, and stock holdings. Taxes were widely felt to be burdensome, unequal, and unfair, leading many Iowans to hide their belongings and avoid the tax collector.

To remedy the situation, the State of Iowa enacted a tax inquisitor law in 1900 that allowed cities or county boards of supervisors to hire private tax investigators, known as “tax ferrets“, to assist with the collection of property taxes and to find more property on which to collect.

Tax ferrets were typically recruited from distant places, and their pay ranged from 15-60% of commissions from any taxes they managed to collect. Unfortunately for taxpayers in those days, officials sought more money rather than a more-rational tax regime.

Iowa has done an outstanding job on this front since the 1900 tax ferret law. The reforms of the last few years have shown that simplifying the tax code improves the relationship between government and the taxpayer.

Nationally, the federal government should learn a lesson from Iowa’s experience, and within the Hawkeye State, local governments should take a closer look at their own tax history.

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