Solutions to Iowa’s Growing Property Tax Problem

Iowa has too much government. Citizens have benefitted from conservative leadership at the state level that has delivered multiple rounds of tax cuts and eased the regulatory burden on businesses and employees, but big-government objectives like property tax growth are on autopilot with no off ramp in sight. Reining in the growth of local government requires solutions to numerous issues.

Iowans for Tax Relief Foundation (ITRF) has created this toolkit to deliver a concise and easily digestible public policy guide for state and local officials who are interested in property tax reform. Since no single policy solution will “fix” Iowa’s property tax, this toolkit offers concrete ideas for policymakers that will bend the expense curve and eventually reduce the burden on taxpayers.

Despite National Economic Uncertainty, Iowa’s Revenue Forecast Remains Strong

As long as spending is under control, the state will continue to be in a strong fiscal position to provide the core government services Iowans expect while continuing to lower taxes and spur economic growth. The State Revenue Estimating Conference (REC) met on December 14, 2022, to evaluate the current (FY23) and next (FY24) fiscal years. December REC meetings are […]

Direct Notification

Direct notification is an aggressive transparency measure forcing local governments to be honest with taxpayers about how their property tax bills will be affected by potential spending increases. Iowans are frustrated with high property taxes, but very few understand the complexity of the system. In 2019, the property tax transparency and accountability law required each city and county to hold a public hearing focused on the proposed budget and total property taxes needed to fund that budget. Information about this hearing such as the date, time and location are required to be published and posted on the local government’s website, social media accounts and the local newspaper.

Assessment Equity and Fairness

All properties should be assessed equally using the same standards to ensure Iowans are not paying more than their fair share in property taxes. Iowa has six different classifications of real property used for property tax purposes: agricultural, residential, commercial, industrial, public utility, and railroad. State law requires property subject to taxation to be assessed at 100% of its fair market value, with an exception for agricultural land, which is assessed using a five-year average productivity calculation.

Consolidation of Property Tax Levies

Having multiple property tax levies allows local governments to shift spending outside the regular general levy driving up the overall cost of government on taxpayers. BACKGROUND No municipality in the State of Iowa may levy a tax unless it is specifically authorized to do so by state law. Over time, the legislature has approved multiple different property tax levies. For […]

November-Only Revenue and Spending Questions

Financial questions that directly affect property taxes and determine some of the most-important decisions affecting local property taxpayers should be held during general November elections when voter turnout is highest. The Iowa Constitution mandates that the general election be held on the first Tuesday after the first Monday in November of each even-numbered year. This includes county officers, such as auditor, sheriff, treasurer, recorder, county attorney, and supervisors, as well as nonpartisan offices, including public hospital trustees, soil and water conservation commissioners, county agricultural extension councils, and township officers. City and school elections are held on the same day in November, except in odd-numbered years.

Uniform Disclosure

All counties should have the same uniform presentation that contains the amount owed, compared with the previous year, and a list of all levies, broken down by the relevant authorities to provide taxpayers with a complete picture of their tax bill. The Iowa State County Treasurer’s Association provides property tax information for all 99 counties. Taxpayers can simply click on their counties and enter their information to view their property tax bills.

Taxpayer-Funded Lobbyists – copy

Taxpayer dollars should be used to advance the public good, not to bankroll lobbyists who advocate against taxpayers’ interests. Taxpayer-funded lobbying is when political subdivisions such as counties, cities and school districts, pay lobbyists with money they have received from taxes. This can include membership fees in government sector lobbying associations like the Iowa League of Cities, Iowa Association of Counties, and the Iowa Association of School Boards.  It can also include local governments hiring and contracting with lobbyists directly.  For instance, in 2022 Linn, Marion, and Polk counties spent a combined $190,000 on lobbying.

Taxpayer-Funded Lobbyists

Taxpayer dollars should be used to advance the public good, not to bankroll lobbyists who advocate against taxpayers’ interests. Taxpayer-funded lobbying is when political subdivisions such as counties, cities and school districts, pay lobbyists with money they have received from taxes. This can include membership fees in government sector lobbying associations like the Iowa League of Cities, Iowa Association of Counties, and the Iowa Association of School Boards.  It can also include local governments hiring and contracting with lobbyists directly.  For instance, in 2022 Linn, Marion, and Polk counties spent a combined $190,000 on lobbying.

Urban Renewal Practices

Local governments may be tying up property tax dollars with needless incentives while further saddling residents and businesses with growing tax burdens.  Urban renewal programs shouldn’t be utilized in areas that are already growing or on projects that would occur without a subsidy anyway. 

Urban renewal areas have existed in Iowa since 1957, and the designation can allow governments to finance public infrastructure, redevelop slums or blighted areas, or (very broadly) promote economic development. Local governments have several tools at their disposal to accomplish those goals, with tax increment financing (TIF) being a common one.

Property Tax Rate Limits

When rate limits apply selectively, taxing authorities can shift responsibilities to those without them. Over time, local government spending goes up, and the intent of the rate limit is negated. Local taxing entities have layered multiple tax levies on each property in addition to general taxation, such as levies dedicated to public libraries, emergency management, debt service, cemeteries, and flood and erosion control. Iowa cities have around 30 different levies, while counties and townships have around 10, and other taxing districts, such as agricultural extensions, county hospitals, and miscellaneous districts, have fewer. Iowa applies the maximum levy rate limit to each individual levy, not on each level of government or in aggregate.  And several types of levies continue without limitations, being permitted at the “amount necessary.”

Local Debt Limits

As of 2021, Iowa’s local governments were carrying a total of $13.8 billion in outstanding debt, of which cities held $7.1 billion, schools $4.9 billion, and counties $1.1 billion. Local taxing jurisdictions should also not be allowed to incur large amounts of debt without a vote of the people. While borrowing small sums may be necessary for emergencies or other unique situations, local boards or city councils incurring debt without taxpayer votes should be infrequent.

“Ratchet-Down” Effect on Local Revenue

Property tax rates are important but advocates often forget that government spending causes higher tax bills. Local governments may even claim they have reduced rates, leaving taxpayers to wonder why their tax bills are bigger. Tax rates only tell one side of the story and can often be misleading. Focusing on revenue controls spending and does not allow local governments to take advantage of windfalls from assessments. More importantly, it forces local governments to be honest.

YTD Revenue Still Tracking Closely With FY22

The most recent Revenue Estimating Conference prediction is aligning with actual results.  January results will provide an even better understanding of revenue trends.   Iowa’s revenue report for November has been released and the data revealed net General Fund revenue for the month was $371.9 million (-38.8%) below the November 2021 net revenue level. When broken down by the three […]

Local Government Spending Limitations

Spending limits are similar to speed limits in a school zone, both are designed to protect. In the case of local governments, they apply the brakes to slow spending down. BACKGROUND One solution for property tax relief is strengthening the 2 percent “soft cap” placed on city and county budgets through the 2019 property tax reform law. A stronger spending […]

New Attorney General, New Opportunities

Constraining the size and scope of the federal government is an issue that should transcend politics or partisanship. State Attorneys General have a vital role in protecting states from regulatory and administrative overreach. Iowans elected a new Attorney General to represent them in the 2022 elections. Forty-year incumbent Tom Miller was defeated by Republican Brenna Bird. Bird, who lost to […]