This article was published in the Iowa Capital Dispatch.
Truth-in-Taxation forces local governments to be more transparent, holds local governments accountable, and provides an opportunity for citizens to have an honest conversation with their elected officials about property taxes.
Frustration with high property taxes is reaching a boiling point, especially after taxpayers across Iowa are receiving their assessment notices. Taxpayers are right to be upset and they should demand property tax relief. However, the county assessor is not to blame. The reason for high property taxes is local government spending. This is why it is essential for taxpayer protections to be included with any property tax reform. Establishing a strong truth-in-taxation law is one taxpayer protection that is proving successful at delivering property tax relief.
Iowa has a complex property tax system, which includes a rollback provision to address assessments. The rollback may provide an assessment limit, but property taxes in Iowa continue to increase. This is one reason why assessment limitations do not always provide the best method for property tax relief. For this reason, the best policy option for property tax reform must focus on addressing local government spending.
Since the 1980s, Utah has led the nation with the most taxpayer friendly property tax law. Utah’s Truth-in-Taxation law guarantees that each taxing entity receives the same property tax revenues as the previous year including new growth. This prevents local governments from getting a windfall because valuations have increased. Truth-in-Taxation works to prevent local governments from benefitting from increased assessments. If assessments increase by 20 percent, it does not mean that local government budgets should increase by 20 percent.
If a local government wants to exceed the certified tax rate, it then requires a Truth-in-Taxation hearing that is accompanied by an extensive direct notification and public hearing process. Truth-in-Taxation also forces local government officials to take recorded votes to approve an increase in tax collections.
Through the Truth-in-Taxation process, local governments must justify why they want to increase taxes for additional spending, forcing them to be more transparent as to why they need additional tax revenue. A crucial aspect of Utah’s law is a direct notification requirement, where notices are sent to taxpayers, providing information on the proposed tax increase and how much their tax bill will increase. It also includes the date, time, and location of the Truth-in-Taxation budget hearing. This extensive public notification and hearing process has been successful, and taxpayers in Utah actively participate in Truth-in-Taxation hearings.
Kansas has followed Utah’s example and passed a strong Truth-in-Taxation law. The law is similar to Utah except that new growth is not permitted. Dave Trabert, CEO of the Kansas Policy Institute, describes the law as solving the “honesty gap” problem in property taxes. Under the Kansas law every local entity’s mill levy is reduced each year so new valuations bring in the same dollar amount of property tax. If they want more tax revenue, local officials must notify taxpayers of their intent, hold a public hearing on the proposed increase, and then vote to create a public record.
Just as with Utah, elected officials in Kansas can no longer claim to be holding the line on property tax while reaping big gains from valuation increases. This is the crucial element of Truth-in-Taxation. By requiring that local governments receive the same amount of revenue as the previous year, it holds the line on spending and if elected officials want to increase spending they must go through the Truth-in-Taxation process. Direct notification provides more clarity and transparency for the taxpayer.
As an example, the Leavenworth school district was considering a 8.6 percent property tax increase, but as a result of the Truth-in-Taxation process taxpayers were able to voice their concern, which resulted in the school board not approving the tax increase. A similar situation occurred with the Baldwin City school board when they proposed a 17.8 percent increase.
Truth in Taxation requires elected officials to be honest; no more pretending to ‘hold the line’ while collecting big increases from valuation changes. Now they have to vote on the entire property tax increase. As a result, in 2021 over half of all local governments in Kansas voted not to increase taxes in 2022.
Both Utah and Kansas demonstrate the effectiveness of Truth-in-Taxation. It forces local governments to be more transparent, holds local governments accountable, and provides an opportunity for citizens to have an honest conversation with their elected officials about property taxes. Truth-in-Taxation places the attention at the heart of the problem, government spending and it is the gold standard for property tax reform.
Rusty Cannon serves as president of the Utah Taxpayers Association.