Why the new tax notice you got in the mail is an important tool for transparency

• John Hendrickson is policy director for Iowans for Tax Relief Foundation.

Property taxes are a top concern for many Iowans. The growing frustration over high property taxes surpasses political party identification and the urban-rural divide. As part of the transformational 2023 property tax reform law local governments in Iowa will now be required to send taxpayers a detailed budget and tax notice.

Some local government officials are opposed to sending the budget and tax notices making the argument that they cost too much and are unnecessary. Why should local governments be opposed to providing greater transparency? Citizen engagement and knowledge is the key to better communities and lower property tax bills. When it comes to property taxes, silence only encourages local governments to keep increasing their spending.

The budget and tax notices are a form of direct notification, which is part of Truth-in-Taxation. Truth-in-Taxation is the gold standard for property tax reform laws. For decades Utah has had a strong Truth-in-Taxation law, which has been successful in not only providing tax relief, but also forcing more transparency and accountability upon local governments. Utah’s law has served as a model for other states. Iowa taxpayers deserve greater transparency and accountability from local governments and direct notification will provide much needed sunlight on budgeting.

By late March, county auditors will be required to send to each taxpayer a budget and tax notice. The notices will include detailed budget and tax information from all taxing authorities. Taxpayers will also be able to see an example of how a potential increase will impact their property tax bill. Further, if a taxing authority wants to exceed current spending levels, then it must justify why an increase is needed and what the additional programs or services will the taxpayers dollars be used. Finally, the date, time, and location of the taxing authority’s budget hearing must be listed within the statement.

It is estimated that the budget and tax notices will cost $1.9 million, or $1.50 per notice. Local government officials who are critical of the notices are arguing that they are not only unnecessary because the information that they will provide is already available and they are a waste of taxpayer dollars. Both accounts are not true.

First, not all taxing authorities provide the same information, and the property tax statements that do provide some of the information arrive after local governments have passed their budgets and it is too late for citizens to act. As an example, existing notices do not justify why additional spending is needed. Second, as to the argument that the notices are a waste of taxpayer dollars, evidence from Utah demonstrates that this is not a financial hardship for local governments. It actually serves the interest of the taxpayer.

In fiscal year 2020 local governments in Iowa collected over $6 billion in property taxes from taxpayers. Local governments continue to collect more from taxpayers. Over the past 20 years, property taxes have grown over 110%

Utah demonstrates that the Truth-in-Taxation budget hearings actually lead to property tax relief. The purpose of the budget and tax notices is to inform taxpayers and encourage them to participate in their local government budget hearings. These budget hearings force more “sunlight” on the local government budget process, and it requires public officials to justify to taxpayers why they want to increase spending. The evidence from Utah clearly shows that they empower taxpayers.

The reason for high property taxes is government spending. For too long property taxes have been on autopilot, and injecting more transparency into local government budgeting will be beneficial for taxpayers.

John Hendrickson is policy director for Iowans for Tax Relief Foundation and Rusty Cannon is president of the Utah Taxpayers Association