This article was originally published by the Telegraph Herald
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. “So this year, we need to go after the real driver of the problem: Spending. Spending is what drives taxes—always has, always will. And the most reliable way to protect taxpayers is to limit the growth of government itself,” stated Governor Kim Reynolds in her Condition of the State Address.
Iowa’s property tax system is undeniably complex, but the fundamental driver of rising tax burdens is straightforward: spending growth. Policymakers are currently considering multiple reform proposals from Governor Reynolds, the House, and the Senate. While these plans differ in structure, they share a key feature, some form of a property tax cap or levy limit.
Design matters. A strong, effective cap should limit the overall growth of property tax revenue without being diluted by carve-outs or other adjustments. Each additional exception or allowance weakens the cap’s ability to restrain spending. Iowa has seen this before, where previous reforms still allowed spending, and therefore tax collections, to rise faster than taxpayers’ ability to keep up.
A well-structured 2% cap does not freeze revenue. It allows property tax collections to grow over time at a more sustainable pace. That said, not all cities and counties will experience immediate growth because of the present law. In some cases, particularly where current levy rates exceed existing statutory caps, rates will first be adjusted downward to those limits.
Revenue growth will depend on valuation changes and the overall cap. This distinction is critical. The goal is not to cut budgets, but to align the long-term growth of government with the growth of the economy and taxpayers’ incomes. This approach preserves local flexibility while enforcing a clear limit on aggregate collections, keeping the focus of reform on controlling spending, which is the root cause of rising tax burdens.
Levy limits are not a new or radical idea. Many states, including Massachusetts and New York, use them to manage property tax growth. Across the country, policymakers are realizing that without constraints, property tax revenues can rise faster than various benchmarks.
Donald Bryson, President of North Carolina’s John Locke Foundation, recently described why property tax caps are a crucial reform:
Levy limits do not require local governments to shrink their budgets. …A levy limit is not a chainsaw. It’s a guardrail. Without guardrails, local governments can quietly allow revenues to grow much faster than the cost of living or the number of residents…Levy limits would simply mean that growth in government remains tied to growth in the real world, not to political appetites.
Sustainable reform begins with spending discipline. When spending growth is restrained, tax burdens become more predictable and manageable.
That does not mean other reforms should be ignored. Addressing TIF, simplifying exemptions, and improving transparency are all worthwhile efforts. But without a mechanism to control spending growth, those changes alone will not deliver lasting relief.
This is why conservative budgeting remains essential. Local governments should continually evaluate how services are delivered and look for efficiencies, rather than defaulting to higher property taxes. The cost of government should not grow faster than the ability of taxpayers to support it.
A 2% property tax cap provides a clear, consistent framework for achieving that goal. It serves as a guardrail, ensuring that government grows at a prudent level. As Bryson states, “fiscal discipline isn’t radical, it’s just responsible.”
Fiscal discipline is the foundation of sustainable tax policy.
Tom Sands serves as Senior Tax Fellow with Iowans for Tax Relief Foundation and previously served 14 years in the Iowa House of Representatives where he chaired the Ways and Means Committee, and John Hendrickson serves as Policy Director for Iowans for Tax Relief Foundation
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