Proponents of revamping Iowa’s property tax system to reduce commercial rates and slow growth for other property classes are bringing a hope-springs-eternal attitude to the 2013 legislative session that begins Jan. 14.
“We’re willing to look at anything,” said Mike Ralston, leader of the Iowa Association of Business & Industry, who saw the split-control Legislature come close last year to resolving Iowa’s property tax inequity that dates back to the 1970s.
Ralston is among those hoping for a compromise solution in 2013. “It has to be meaningful, but it doesn’t have to be perfect,” he said.
Republican Gov. Terry Branstad said voters’ decision to continue with divided state government means he and legislative partisans must work together to resolve a vexing issue that is holding back Iowa’s potential for economic growth.
Branstad said he hopes to forge a bipartisan property tax relief agreement by providing enough state money to fully fund local tax credits and to protect local governments against potential revenue losses caused by lowering rates on commercial property and capping increases for homeowners and farmers. He also is looking at revamping K-12 school funding in a way that shifts per-pupil costs from property taxes to state aid.
“I want to get this done,” the governor said. “At the end of the day, I’m probably looking at providing the most significant property tax relief we’ve ever done.”
The Gazette’s editorial board agrees that reform may be in order, but it must be appropriate reform.
“Most legislators agree that the current system is unfair to commercial property owners, who pay taxes on 100 percent of the taxable value of their business property,” the board wrote in an editorial published Sunday. “Residential property owners, by contrast, pay on only about 50 percent of a home’s value.
“We think the Legislature should take action to reduce commercial taxes,” the editorial continues. “And we believe that it should be done in such a way that provides relief to businesses but does not undermine the efforts of local governments to provide critical services. We recognize that’s a tall order, but we think it would be shortsighted to make Iowa’s property taxes more competitive by hobbling cities, such as Cedar Rapids, that are the engines driving Iowa’s economic growth.
“If our Statehouse leaders match their commendable desire to help businesses with a clear understanding of local governments’ vital role in economic growth, and if they see local leaders as partners in reform, not targets for more state mandates and restrictions, then this could really be the year,” the editorial concludes.
Do you think Iowa’s city governments rely too much on property tax for revenue? Should they have more options than the state allows?