A blueprint for property tax reform in Iowa

Just a few years ago, the Tax Foundation ranked Iowa among the worst states for business tax climates. In 2020, Iowa placed 43rd in the State Tax Competitiveness Index. Thanks to the pro-growth policies of Gov. Kim Reynolds and the Legislature, Iowa has since climbed to 17th — a remarkable improvement. Yet despite this progress, Iowa still ranks 33rd nationally in property tax burden.

Iowans are increasingly frustrated not only by higher property tax bills but by the lack of meaningful relief. The 2026 legislative session — Reynolds’ final one — presents a historic opportunity to reform Iowa’s property tax system and further strengthen our economy.

While much of the public discussion focuses on homeowners, small businesses also shoulder a heavy property tax burden. These employers — who make up the backbone of Iowa’s economy — need a competitive tax environment to grow and create jobs.

States across the country are grappling with how to rein in property taxes. Fortunately, Iowa already has a proven policy blueprint: the approach used to enact income tax reform.

In 2022, Reynolds and the Legislature transformed Iowa’s complex, multi-rate income tax into a low, single-rate flat tax. The top rate fell from 8.98% in 2018 to 3.8% today — a nearly 60% reduction. That success was achieved through conservative budgeting and spending restraint. The same disciplined framework must now be applied to property tax reform.

Since 2006, property taxes in Iowa have grown by 107%, far outpacing population growth and inflation. In the past two years alone, collections have increased by more than 10%. Local governments will collect $6.4 billion in property taxes in Fiscal Year 2026 —$239.8 million more than the previous year, a 3.9% increase.

Any reform that does not limit local government spending will fail to deliver real tax relief. A recent survey found that 72% of Iowans — across party lines — support a cap on annual property tax increases, limiting local governments from collecting more than 2% in additional revenue each year. This includes 68% of independents and 59% of Democrats.

To provide sustainable tax relief, Iowa must ensure that local government budgets grow no faster than taxpayers’ ability to pay.

Additional steps should also be considered. Local governments can improve efficiency by consolidating services, adopting zero-based budgeting, and regularly reviewing services to eliminate duplication.

These reforms won’t just save money — they’ll build long-term fiscal discipline.

Reynolds has already proven her commitment to Iowa taxpayers — enacting a 3.8% flat income tax, eliminating the inheritance tax, lowering the corporate rate, and broadening the sales tax base. With one final opportunity before her, she can now deliver a gold-standard property tax reform that provides real relief and cements Iowa’s reputation as a national leader in pro-growth, taxpayer-friendly policy.

Matt Everson is Iowa State Director for the National Federation of Independent Business (NFIB) and John Hendrickson is Policy Director for Iowans for Tax Relief Foundation.