Do Iowa governments rely too much on property taxes? Should they have more options?
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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?
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It will be interesting to see where they’ll make up the funding if and when they cut property tax on businesses. It appears the Iowa government is about the same as other state and the federal governments; they don’t approach the subject of spending cuts. When there are proposed cuts, they target areas they know aren’t realistic, while keeping the pork firmly in place. You can be certain of one thing: if they cut the business property tax, they’ll raise taxes elsewhere to make up the difference – they’re not about to cut back on needless spending.
“they’re not about to cut back on needless spending”
i agree! Should we tax the shelter of the poor for art in pubic places? No!
Should we tax capital intense businesses for government contributions to charitabe organizations? No, that can/should come from the private sector! Should the cost of social services be collected from the unemployed?
Outside of infrastructure needs, property taxes are a round peg in a square hole.
Question should read, “do city and COUNTY governments rely too much on property taxes” and the answer is absolutely yes!
Property taxes occur on the poor, the elderly on fixed incomes, the unemployed, and target capital intense businesses whether they are making a profit or not. To partially offset this onerous circumstance, government hands out a plethora of exemptions including TIF’s to upper middle class neighborhoods and highly profitable, well established commercial businesses. If a tax is so foul that we need so many exemptions, shouldn’t we look for another form of revenue collection?
Education, mental health and social programs should be the responsibilty of those who have the ability to pay and not be restricted to businesses that are capital intense. Besides, the capital intense businesses have become a declining slice of Iowa’s economic pie over the last decade or two.
Mental health in particular should be funded more by state revenue. Mental health is about 40% of Linn County’s budget. Education should be included in state funding because bed room communities suffer under the current property tax system.
We all know why property taxes can’t go away – it’s a steady stream of income (ie. spending) for local governments. Sadly, many of those who must pay property taxes don’t have a steady stream of income.
Let’s put down our partisan swords for once and support the governor’s plan for property tax relief!
The first and most important issue is how the State can get by on less. It becomes easy to lower taxes on everyone, especially businesses that create jobs if government becomes more efficient and effective. Cut spending and then cut taxes. Get government out of the way of prosperity.