Iowans recently received confusing property tax statements that didn’t clearly explain how proposed changes would affect their bills. To improve transparency, Iowa should follow the lead of states like Minnesota and redesign these notices to be clear, accurate, and easy to understand.
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.
The Truth-in-Taxation process, which was a positive step toward more transparency, must be strengthened in Iowa. As part of the 2023 property tax reform law, local governments are required to send taxpayers property tax statements that include not only tax information, but also the date, time, and location of the local budget hearing.
This direct notification process is crucial for improving transparency in Iowa’s complex property tax system. It is at the local budget hearing that taxpayers have the opportunity—and responsibility—to voice their concerns about property taxes. In addition to information about the budget hearing, the property tax notices also provide valuable data such as the proposed budget increase and whether a locality plans to increase or decrease its levies.
However, the notices were poorly designed, and many taxpayers were left confused and frustrated. (To help clarify the notices, taxpayers are directed to the Department of Management website.) Furthermore, the statements were vague in describing how a potential increase would impact a taxpayer’s actual bill.
When Iowans receive their actual property tax bill, they are given a well-designed statement. This final statement breaks down how their taxes are distributed among the various local government entities that collect property tax dollars, showing both current and prior year amounts for each taxing district. Taxpayers can also see the percentage of their bill going to each local entity. Often, the school district is the primary driver of the overall property tax burden. Additionally, taxpayers can view the percentage change each taxing district made from the prior fiscal year.
Even though these statements provide valuable information, they arrive too late to influence any local budget decisions. That’s why the earlier property tax proposals, sent in preparation for budget hearings, are so important.
The direct notification process must be improved. Iowa should look to other states with strong Truth-in-Taxation laws that send clear, easy-to-understand taxpayer statements. For example, both Utah and Minnesota send transparent, well-designed statements. Minnesota’s property tax statement offers a template Iowa policymakers should consider replicating.
Many local officials argue that property tax statements are complicated and a waste of taxpayer dollars. They are right that the statements are complicated—but if properly designed and filled with accurate information, they are not a waste of money.
The most effective part of the budget notice is the inclusion of the date, time, and location for each locality’s budget hearing, along with property tax information for the current tax amount, the proposed increase, and how that increase may impact a taxpayer’s bill.
To make these budget notices more effective, they must be completely revised following the Minnesota example (below). After receiving a notice, a taxpayer should be able to clearly understand how a proposed increase would affect their property tax bill.
Without improving these notices, the effort becomes a waste of taxpayer money. It makes little sense to send notices that then require taxpayers to visit a website for clarification. Iowa’s property tax system needs greater transparency, and an improved property tax statement will help citizens become more informed and more involved in their local budget process.
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