As Iowa continues its long search for meaningful property tax relief, one idea being promoted is the suggestion that out-of-state landowners should pay higher property tax rates than Iowa residents. On the surface, it’s an idea that appeals to frustration: with more agricultural land and other properties being purchased by out-of-state investors—and sometimes even foreign entities—it can be tempting to shift more of the tax burden onto owners who are perceived as less rooted in Iowa communities. After all, when policymakers want to raise revenue, nonresidents are often the easiest political target.
But while this proposal may sound attractive, it raises serious questions about policy fairness, economic consequences, and—most importantly—its constitutionality. Before Iowa lawmakers consider charging different tax rates to nonresident landowners, they must confront the legal and practical realities that make such a policy unlikely to survive in court and even less likely to deliver meaningful relief to Iowa taxpayers.
The Founding Fathers designed the United States as a vast “internal free trade network,” meaning states cannot erect trade barriers or impose tariffs on one another. The Constitution establishes a framework requiring that residents and non-residents be treated fairly in matters of taxation.
Three constitutional clauses are especially relevant to why imposing higher property tax rates on non-residents would almost certainly be unconstitutional. The Supreme Court has repeatedly held that state taxes must be “internally consistent,” and these protections are rooted in the Privileges and Immunities Clause, the Equal Protection Clause, and the Commerce Clause.
Privileges and Immunities Clause (Article IV, Section 2):
“The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.”
This clause generally prohibits states from imposing higher taxes on non-residents than on residents. For example, in Borden v. Selden, an Iowa property-tax credit available only to resident landowners was struck down as unconstitutional under this clause.
Equal Protection Clause (14th Amendment):
“No State shall… deny to any person within its jurisdiction the equal protection of the law.”
Although often applied to cases involving voting rights or racial classifications, the Court has also used equal-protection principles to invalidate tax schemes that discriminate against non-residents. States have been blocked from taxing certain out-of-state businesses at higher rates or from offering rebates only to long-term residents—both clear examples of preferential treatment for residents over non-residents.
Commerce Clause (Article I, Section 8):
“To regulate Commerce… among the several States.”
This clause prevents states from imposing policies that unduly burden interstate commerce. Taxing non-residents who own property or conduct business in a state at higher rates than residents would likely be found unconstitutional because it interferes with interstate economic activity—a domain reserved for Congress.
Together, these constitutional protections make clear that states cannot disadvantage non-residents simply because they live elsewhere. Any attempt to levy higher property tax rates on out-of-state landowners would almost certainly be struck down in court.
For example, the United States Supreme Court struck down a Maine law that denied a property tax exemption to charitable institutions that primarily served non-residents. The Court found that Maine’s tax scheme was an unconstitutional form of economic protectionism that favored local consumers and in-state service providers.
It’s important to note that not every difference in cost between residents and non-residents is unconstitutional. Public universities, for example, charge higher tuition to non-residents because those students’ families have not contributed to the institution through state taxes. Likewise, hunting and fishing licenses often carry higher fees for non-residents, and courts have consistently held that such distinctions are permissible when tied to legitimate state interests and not used as disguised tax penalties.
But property taxation is different. Efforts to impose higher property tax rates on non-resident landowners would require Iowa to treat two taxpayers—who own the same type of property and receive the same local services—differently based solely on their ZIP code. That is exactly the kind of discriminatory tax treatment the Constitution prohibits. While there may be narrow technical measures that are allowable, such as credits or exemptions, any system designed to advantage one class of taxpayers at the expense of another ultimately undermines the fairness and integrity of the tax code.
Iowans deserve a solution that delivers meaningful, lasting property-tax relief. That cannot happen unless policymakers confront the real driver behind rising tax bills: unchecked local government spending. Targeting non-resident landowners may be politically tempting, and it may even feel satisfying in the moment, but it will neither withstand constitutional scrutiny nor solve the underlying problem. The path forward is clear. Iowa should resist schemes that pit taxpayers against one another and instead focus on the reforms that matter most—those that slow the growth of local spending and ensure all property owners receive the relief they need.
Print a PDF