Property tax reform can feel like fighting a war on a thousand fronts. Should the focus be on assessments, levy rates, or rollback? Or on Tax Increment Financing (TIF), targeted credits, and exemptions? School funding adds yet another layer. While all these factors influence property taxes, they often distract from the core issue that has undermined past reform efforts. That issue is government spending.
Iowa’s budget remains structurally sound, but spending is accelerating: The FY 2026 budget totals about $9.4 billion—up more than 5 percent year over year—raising sustainability concerns even as lawmakers face a $1 billion shortfall that is not a true deficit due to large reserve balances. Strong reserves and credit ratings provide a cushion, not a blank check: Iowa closed FY 2025 with nearly $1.9 billion in surplus, more than $900 million in reserves, and roughly $4 billion in the Taxpayer Relief Fund, helping maintain AAA credit ratings—but rating agencies warn disciplined spending must continue. Tax reform was planned and paid for by restraint, not federal windfalls: The full phase-in of the 3.8 percent flat tax reduced state revenues as expected, leaving more money with taxpayers; maintaining conservative budgeting—rather than using reserves to fuel faster spending growth—is essential to preserve fiscal stability and enable future reforms.
Iowa’s current 99% spending limitation helps restrain spending but can be easily bypassed and doesn’t prevent government from growing faster than taxpayers’ ability to pay. Stronger fiscal rules, such as tying spending to population plus inflation, limiting tax increases, or constitutional protections, would build long-term stability and safeguard recent tax reforms. Conservative budgeting has already strengthened Iowa’s finances; maintaining it will protect taxpayers, support continued tax relief, and ensure sustainable budgeting in the future. Iowa has earned a reputation for responsible budgeting and strong fiscal management, especially compared to states facing deep financial trouble. As tax relief continues and our economy grows, Iowa must ensure that future budgets remain just as stable and sustainable as today’s. Strengthening our spending limits is one way to protect taxpayers, preserve Iowa’s fiscal momentum, and keep the state on a path toward long-term prosperity.
Iowa’s fiscal position is strong, but rising spending and short-term revenue declines from tax reforms make it critical for lawmakers to prioritize long-term budget discipline.
To support this goal, policymakers could strengthen the state’s spending cap by tying budget growth to population and inflation, and adopt priority-based budgeting and independent efficiency audits to control costs and ensure spending aligns with core government functions.
Lawmakers could also assess Iowa’s reliance on federal funds and continue streamlining state government as strategies to improve transparency, limit bureaucratic growth, and reinforce long-term fiscal sustainability.
Iowa’s reliance on federal funds flowing through our state—which cumulatively exceed the $9.4 billion state General Fund—reveals a growing imbalance that puts Iowa at risk. With Congress considering ways to rein in federal deficits by cutting spending on programs like Medicaid or food assistance (SNAP), Iowa’s General Fund might be forced to make up the difference. This would give Iowa taxpayers serious pain.
Iowa’s FY 2026 budget increases spending by $506 million (5.6%) to $9.4 billion, with 85% of the funds directed toward education and Medicaid—two areas where costs continue to rise on autopilot.
While the expansion of Education Savings Accounts and Medicaid contributed to the growth, lawmakers also used one-time gambling revenue to fund ongoing expenses—an unsustainable budget practice that could shift long-term costs to taxpayers.
Iowa’s fiscal foundation remains strong, but policymakers must resist turning $9.4 billion into the new normal and avoid raiding the Taxpayer Relief Fund, which was created to deliver tax relief—not to fuel more government spending.
Income tax cuts are not the problem; uncontrolled spending is. It’s hardest to control spending when accounts are full, which is exactly when restraint and conservative budgeting matter most. The legislature has passed a $9.4 billion Fiscal Year 2026 budget, which is 5.7 percent over the previous budget. This continues a two-year increase in state spending above recent baseline trends that should alarm legislators. A leading cause of the increase is due to two significant budget line items, which include an increase in the state cost of Medicaid and Education Savings Accounts (ESAs). However, this spending trend cannot continue.
Iowa’s fiscal house is in order. Despite tax cuts reducing revenue as planned, the state can meet its obligations.
Here’s the real question Iowans need to ask—do we want a government-driven economy that takes more of our hard-earned money, or do we want to grow the private sector that allows us to keep more of those dollars?
Critics are currently pointing to Iowa’s 1.7 percent GDP growth as evidence that Governor Kim Reynolds’ fiscal policies aren’t working. These critics often highlight progressive states as examples, claiming that greater government “investment” made possible by higher levels of spending and taxation leads to stronger economic growth. This is the modern liberal philosophy: centralization and higher levels of government spending yield better outcomes.
Most Iowans have received their property tax statements in the mail. Many local government officials across Iowa are complaining that these statements are inaccurate and provide taxpayers with misleading information. The reason for this is that each statement contains a hypothetical example of a residential home worth $100,000, along with a 10 percent assessment increase, which is supposed to give taxpayers an idea of how their tax bill will be impacted. These examples rarely mirror reality.
As the legislative session progresses, attention will soon turn to appropriations and tax policy. A key factor shaping these discussions will be determined on Thursday, March 13, when the Revenue Estimating Conference (REC) updates Iowa’s revenue forecast. By law, the legislature must use the lower of the March or December estimates as the basis for the Fiscal Year 2026 budget.
The popularity of President Donald Trump is influencing state policy, as legislators and governors across the nation seek to replicate the Make America Great Again agenda. Some of the most prevalent fiscal initiatives include state-level versions of the Department of Government Efficiency (DOGE) and adopting tax proposals, such as “no tax on tips” and “no tax on overtime pay.” Currently, three “no tax on tips” bills and two “no tax on overtime pay” bills have been introduced in the Iowa legislature.
Future property tax reform must focus on controlling local government spending. A levy or budget limit is the best path forward. By capping the amount of property tax revenue localities can collect, they will be forced to manage spending more responsibly. At its core, taxation is driven by government spending—and if taxpayers want lower taxes, government at all levels must spend less.
Embedding these protections will safeguard taxpayers from pressures by special interests demanding increased spending. The flat tax promotes economic growth, and the two-thirds requirement ensures fiscal restraint while maintaining Iowa’s competitive edge among states.
The real cause of Iowa’s high property taxes isn’t rising assessments—it’s unchecked local government spending. HF 718 was a start, but stronger reforms are needed to protect taxpayers and ensure sustainable growth.
Governor Kim Reynolds recently delivered her Condition of the State Address, outlining her legislative priorities and emphasizing Iowa’s fiscal strength, achieved through conservative policies. “I can say, once again, that the condition of our state is strong,” she stated. This strength is especially evident in Iowa’s fiscal foundation, as the state ranks as the most fiscally conservative in the nation. This success reflects the conservative budget and tax policies enacted by Governor Reynolds and the legislature.
Iowa has more than enough money to pay for its financial obligations and budget priorities. 30-Second Summary: 1. Strong Fiscal Position: Despite lower revenue projections due to tax cuts, Iowa has sufficient funds to meet obligations, maintain reserves, and continue budget priorities. Surpluses are projected to remain robust, with a $3.9 billion Taxpayer Relief Fund balance expected by FY 2025. […]
The flat tax represents a significant step toward a simpler, fairer, and more prosperous future, ensuring economic growth and stability for generations to come. In just a few weeks, Iowa will transition to a flat income tax, marking a significant change for the state. Beginning in January 2025, Iowans will experience the benefits of this reform, which allows them to […]
Income taxes are paid at the state level and are used for state government functions. Property taxes, on the other hand, are paid at the local level and used for local government functions. There is not a connection between the two types of taxes. In the complex world of taxation, blame for painful bills is tossed around like a scalding hot […]
This article was published in The Gazette. Spending drives taxation. A strict 2 percent property tax cap on the growth of property taxes would force local governments to restrain spending. Iowa has been successful at income tax reform because it has balanced prudent budgeting with pro-growth tax rate reductions. In addition to commonsensical conservative budgeting, Gov. Kim Reynolds also has […]
Lowering property taxes is crucial for Iowa’s economic growth and competitiveness, but this will only happen if tax relief extends to ALL taxpayers. A common theme among legislators, regardless of party, is that high property taxes remain a recurring concern among their constituents. This issue is also prominent on the campaign trail. Recently, the Des Moines Register reported that a […]
Constitutional protections exist for other state funds, and it is time for Iowa taxpayers to receive that same benefit. Securing the tax reforms already enacted in Iowa by adding protections to the state constitution is essential to preserving the progress made since 2018. These reforms, particularly the shift to a flat tax, have transformed Iowa’s tax system into one that […]
Let’s be honest, big government is big bureaucracy, and common sense tells us big bureaucracy is ineffective. That’s why ITR Foundation works to:
By applying the principles of limited government, free enterprise, and the rule of law to public policy, we can ensure all Iowans will have the opportunity to succeed.
ITR Foundation set the policy groundwork for many recent taxpayer victories in Iowa: