Iowa has the 10th highest property tax burden in the country.
The Tax Foundation recently released their updated property tax rankings and Iowa continues to be ranked the 10th highest in the nation. This is not a ranking Iowa should be proud of, and this should motivate legislators to enact meaningful property tax reform that will not only provide tax relief but also improve our standing.
Property taxes have surged over the past two decades in Iowa, increasing by over 110 percent. This growth has far outstripped both population growth and inflation, placing a heavy burden on taxpayers. The root cause of high property taxes remains local government spending. For too long, local governments have been on autopilot as government spending has increased and cities and counties have taken advantage of assessment windfalls.
Local governments continue to increase their property tax collections, which means they increase their spending. From Fiscal Year 2024 to Fiscal Year 2025 Iowa’s counties are increasing their property tax collections by more than 7 percent, cities more than 6 percent, and school districts more than 5 percent. This means that taxpayers will pay more than $7 billion in property taxes to fund local governments.
With a growing frustration, many taxpayers are asking why past reforms did not provide tax relief. The reason recent reforms and past measures have failed to provide long lasting tax relief is that they did not address local government spending. Going forward it will be imperative for the next property tax reform measure to address local government spending growth.
This is why any future reform must include a spending limitation that would force local governments to lower their spending. Applying a strict 2 percent property tax cap on the growth of property taxes would force local governments to restrain spending. If Iowa had a 2 percent property tax cap this year it would have saved taxpayers $250 million.
Local government spending is driving the property tax problem. The Tax Foundation’s ranking is a reminder that Iowa has a serious problem. High property taxes are not only hurting taxpayers, but they are also a deterrent to economic growth.
Iowa’s 3.8 percent flat income tax is one of the lowest income tax rates in the nation. This is a historic achievement, especially when only a few years ago, Iowa’s top income tax rate was one of the highest in the nation. The progress on income taxes demonstrates that Iowa’s legislature and governor can make great strides on tax policy when they set their minds to it. Now is the time to turn that same focus to property taxes.
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