A spending limitation would deliver lasting property tax relief by taking a head on approach to addressing runaway local government spending.
Property taxes are a concern for taxpayers across the nation and it seems Iowa is not the only place where lawmakers are attempting to deliver much needed relief from the burden of local government spending. The Montana Legislature is also considering a reform, HB 324, which if enacted would place a cap on the growth of local government budgets. Specifically, the spending limitation would limit the growth of budgets to the rate of population growth and inflation. This type of restraint should sound familiar, as it is the same style of limitation ITR Foundation touted as we discussed a Conservative Iowa Budget.
Kendall Cotton, President of Montana’s Frontier Institute, stated that the spending limit would “help keep the cost of government within the bounds of what average taxpayers can reasonably afford and make room for property tax relief. While Montanans are tightening their belts amid skyrocketing property taxes, inflation and increased cost of living, many of our local governments are continuing a spending spree.” Iowans are confronted with those same economic realities and Cotton has correctly diagnosed the problem.
Montana’s proposed spending limitation formula would be based on the sum of the average inflation rate of the prior three years plus the average population growth rate of the local government for the prior three years. The rate of inflation would be calculated using CPI and population growth based on the most recent estimate provided by the United States Census Bureau. The limitation would apply to expenditures from all available sources of revenue collected during the prior year, including federal funds, state funds, and grants, payments of principal and interest on bond indebtedness, and any grants, gifts, devises, or bequests made to the local government. The legislation also provides a few “escape hatches” for local governments, allowing additional spending during times of disaster declarations or with local voter approval at the polls.
Iowa’s legislative history is filled with well-intentioned attempts at providing property tax relief. Unfortunately, most of those changes have only been able to ease the property tax burden temporarily, as none of them have been able to directly confront the issue of local government spending. Iowa lawmakers would likely find a receptive electorate if they chose to tackle that problem head-on. Recent polling by Iowans for Tax Relief Foundation found not only that a majority of Iowans demand property tax relief, but 56 percent would support a spending limitation applied to local governments.
It is time to seriously consider ways to constrain the growth of local governments and provide real and lasting relief for taxpayers.
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