Removing the Mental Health Tax Burden From Counties

In 2021, Governor Kim Reynolds and the Iowa Legislature worked to addresses high property taxes across the state with the passage of a measure which realigned the mental health funding system from local counties to the state budget.  Historically, Iowa has been the only state in the nation to fund mental health programs through local property taxes. This resulted in a large property tax savings for Iowa counties. It was left up to local county officials to pass on that savings to taxpayers.

The latest policy brief by ITR Foundation Research Director Sarah Curry, DBA, Removing the Mental Health Tax Burden from Iowa Counties, is downloadable below.

In the report, Curry reviews the history of the mental health levy in Iowa, provides an overview of the removal of the county mental health property tax levy, assesses the results of the policy change, and evaluates how it affected Iowans across the state. The state left it to local county officials to pass the savings on to taxpayers. Data and analysis for each of Iowa’s 99 counties are provided in the report.

“The good intentions with which elected officials enact legislation do not relieve a community of the obligation to follow up on its results and ensure that the reality matched expectations,” Curry writes in the report.

“An analysis of statewide data finds that county governments were not able to pass along all the savings the Iowa Legislature prepared for them with the removal of the mental health levy. The average urban levy rate for Iowa counties in 2022 was $6.23, with the mental health levy averaging $0.31 per county, or 5.0 percent of the overall rate. The average urban levy rate in 2023, after the full phase-out of the mental health levy, was still $6.00, a reduction of just 3.8 percent” Curry writes.

Here are the highlights on this topic:

  • Iowa counties are no longer tasked with funding mental health services in fiscal year 2023 (FY23).
  • Forty-eight counties did not pass along the full amount of mental health savings the state provided to taxpayers.
  • Floyd, Davis, Sac, Washington, Worth, and Hancock Counties made the largest increases to their levy rates when factoring in the elimination of the mental health levy.
  • Taylor, Wayne, Madison, Hardin, Mills, and Van Buren Counties made the largest cuts to their property tax levy rates when factoring in the elimination of the mental health levy.



Click here to download.