In the case of Webster City and Hamilton County, the average increase in property tax dollars collected was significantly more than the increase in the rate.
When discussing property taxes, local elected officials in Iowa often use variations of the phrase, “We kept the rate the same” or “We didn’t raise the rate.” They say this because it sounds good, but it does not mean they did not increase your property tax bill.
The rate does not matter; the dollars local governments take from taxpayers do. Property taxes are based on an estimated value of your home, and that estimate changes regularly. In practice, the rate is simply an incidental middle step when calculating your taxes.
In the case of Webster City and Hamilton County, the last 18 years’ worth of property tax data show the average increase in property tax dollars collected was higher than the average increase in the rate. For Webster City, dollars collected increased by nearly $2 million over the last two decades, or 48%. The corresponding cumulative rate increase was only 14%. The same situation exists for Hamilton County. Property tax collections increased more than $5.1 million, or 64%, while rates decreased 3.5%.
Total property taxes paid by residents in Webster City averaged a 2.7% annual increase, while residents in Hamilton County paid an average annual increase of 3.6%. In contrast, the average annual rate changes were +0.8% for Webster City and -0.2% for Hamilton County. When property values go up, local governments can simply leave the rates alone and very easily collect more in property taxes.
Do not let local officials tell you they cut property taxes because they lowered the rate; it does not work that way. Ask, instead, how many tax dollars they are collecting from you-and make sure that number goes down.
At the end of the day, taxpayers must pay attention to the spending of local governments. Spending is the first step — the input — of the tax calculation. That, not the rate, dictates how much your local government draws down your bank account.
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