Property Tax Relief Shouldn’t Play Favorites

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 legislative candidate proposed eliminating property taxes for senior citizens. “I propose that we eliminate property taxes for our seniors without losing one penny of public services,” the candidate stated.

While property tax relief for senior citizens is especially popular, as this group is often the most vocal about high property taxes, recent property tax reforms have also provided special credits and incentives for other groups. However, targeting a specific voting bloc or special interest group may be politically advantageous, but it does not necessarily result in sound tax policy. The most effective property tax relief should apply to all taxpayers rather than favoring certain groups.

The Iowans for Tax Relief Foundation believes that any sound tax policy should be based on the following principles:

  • Fair: Iowa’s tax code should be fair and avoid favoring one group of taxpayers over others.
  • Protective of Freedom: Iowa’s tax code should support freedom, not social engineering.
  • Transparent: Iowa’s tax code is too complex. A simpler tax structure would be more taxpayer-friendly, allowing for greater transparency and accountability regarding tax credits and incentives.
  • Limited: Iowa’s tax code should be limited to financing only essential functions of state government. It is unfair for the government to have unlimited access to individuals’ and businesses’ hard-earned income.
  • Competitive: Iowa’s tax code should encourage economic growth rather than hinder it.

These principles, especially fairness, are essential to property tax reform. Property taxes are widely disliked as they are wealth-based; just because a home or property is valued at a certain amount does not mean that the owner has that value in cash.

Arguments often focus on certain groups, such as seniors, being on a “fixed income,” but many families and individuals essentially live on fixed incomes. After all, they don’t have a magic wand to wave and generate more income whenever they’d like. Stop and think for a moment about all of the taxpayers bearing the weight of high inflation in this post-COVID economy. This could include families with both parents working, single parents, recent college graduates trying to rent (since property taxes affect renters too), or small business owners struggling to make payroll.

Providing property tax relief to only one group is also poor policy, as it shifts the tax burden to others. The candidate who proposed eliminating property taxes for seniors “without losing one penny of public services” offers an example. As economist Milton Friedman famously said, “There is no such thing as a free lunch.”

The same holds true for economic incentives or Tax Increment Financing (TIF) abuse. When businesses seek tax relief to build or expand, local governments often offer incentives. Although the business receiving the incentive benefits, the tax burden shifts to other taxpayers, particularly small businesses. Similarly, when a city waives property taxes for certain homeowners, this benefits them but shifts the tax burden to others, leaving the problem of high property taxes unresolved.

Eliminating or reducing property taxes solely for seniors or any other specific group will only transfer the burden to other taxpayers. The best tax relief is broad-based, lowering rates for all taxpayers. For such reform to be effective, local government spending must be limited. Property taxes are often high because of escalating local government spending. Many local governments believe economic growth depends on the philosophy, “build it, and they will come,” leading to spending on non-essential projects like bike trails, water parks, and sports facilities. While these projects have value, a balance must be struck.

Lowering property taxes is crucial for Iowa’s economic growth and competitiveness, but this will only happen if tax relief extends to ALL taxpayers. The goal of property tax reform should be to provide relief for all Iowans without favoring certain groups. Limiting local government spending is the most effective way to achieve meaningful property tax relief for all.

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