Third GOP property tax proposal emerges as Iowa lawmakers debate how to cut tax bills

DES MOINES — Iowa House Republicans on Wednesday unveiled a property tax proposal they say would rein in rising tax bills for homeowners and renters while forcing cities and counties to slow the growth of property-tax revenue — a move local government leaders warn could squeeze funding for services like public safety, emergency response and schools.

House Study Bill 596 would cap local government property-tax revenue growth at 2 percent a year (with exceptions for debt service and school funding), create a $25,000 exemption for all residential property, require a 60 percent voter approval threshold for property-tax-backed bonds and revamp tax notices sent to property owners.

It is the third property tax plan rolled out by Republican leaders in little more than a week, following separate proposals from Senate Republicans and Gov. Kim Reynolds, underscoring both the urgency of the issue — and the lack of consensus on how to fix it.

“For too long, the property tax system has put certainty for government budgets over the certainty of family budgets,” said Carter Nordman, R-Dallas Center, chair of the tax policy House Ways and Means Committee. “With this proposal, Republicans are flipping that script. Our proposal focuses on real, tangible relief for all homeowners.”

What’s in the House GOP plan?

Under the proposal, cities, counties and other local taxing entities would be limited to 2 percent annual growth in property-tax revenue from existing property, while still being allowed to collect taxes from new construction or annexations. Lawmakers emphasized the cap applies to revenue, not property values, meaning assessments could still rise — but tax rates would have to adjust to keep revenue growth within the limit.

The bill would also create a $25,000 exemption for all residential property, applied after Iowa’s existing rollback calculations. House leaders said the broad exemption is meant to provide relief not just to homeowners, but also to renters. Landlords, though, would have to choose to pass on that savings.

Additional provisions include:

“We believe that if a local government wants to take on debt that you have to pay for, they need a clear mandate,” Nordman said. “This is why we are requiring a 60 percent vote on any bonds payable with your property taxes.”

House Speaker Pat Grassley, R-New Hartford, said the plan is designed to prioritize predictability for taxpayers, even if it means tougher budget choices for local governments.

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“We made the decision that certainty for the taxpayer is the priority,” Grassley said. “If you set that number too high, you’re basically continuing the status quo.”

Nordman said the House plan is meant to go beyond the Legislature’s 2023 property tax package — legislation that created a new $6,500 homestead exemption for seniors 65 and older, limited local government revenue growth from general levies and included new transparency requirements. But Nordman argued Iowans have continued to see their property tax bills climb since then, and he framed the new House proposal as both a stronger curb on revenue growth and a push for clearer, more usable information for taxpayers.

“One of the big parts is ensuring that we are getting more information to voters so they can understand better how their local governments are spending their money,” Nordman said. “Right now, the notices that go out are very confusing, and I think most of them just end up in the trash.”

Nordman said House Republicans worked with the Iowa League of Cities on a template to better explain where property tax dollars go — and he suggested the 2023 changes did not produce the kind of broad relief lawmakers promised.

“I think Iowans continue to see their tax bill go up,” he said. “I think a lot of what happened a few years ago became a shell game within local governments, where things were just being moved around to different levies, and we really don't see extreme relief there, so we're taking a different approach here.”

Impact still being calculated

A fiscal impact of the legislation’s policy has not yet been calculated. And House Republicans said they do not yet have a statewide estimate of how much the proposal would save taxpayers, saying the effects of the revenue cap and exemption would vary widely by community.

Local government leaders have raised concerns that a hard revenue cap could limit their ability to keep up with inflation or respond to rising costs. Property taxes are levied by cities, counties and school districts and are a primary source of funding for services such as police and fire protection, emergency medical response and schools.

A crowded GOP field of ideas

Republican lawmakers, who hold agenda-setting majorities in both chambers of the Iowa Legislature and control the governor’s office, have made property tax legislation a top priority for the 2026 session after failing to reach agreement last year.

The push comes as Iowa continues to rank near the top nationally in property taxes. Iowa has the 11th-highest property tax burden in the country, according to the Tax Foundation, and the 10th-highest effective property tax rate, according to Rocket Mortgage.

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The House plan joins two other major GOP proposals already on the table:

Reynolds’ proposal also includes tools aimed at reshaping local government operations. Her plan would create a $10 million state fund to provide grants to cities and counties seeking to consolidate government positions or enter shared-services agreements with other local governments. It also would eliminate election mandates for county treasurer, auditor and recorder positions, allowing those offices to be appointed rather than elected.

Asked whether the House plan contains similar mechanisms, Grassley said House leaders expect efficiencies to flow primarily from the revenue limits themselves.

“So I think with that revenue cap, it will just naturally lead to more efficiencies,” he said.

Grassley added that the House bill instead leans on councils of governments to help local entities identify and implement shared services or regional approaches.

House Majority Leader Bobby Kaufmann, R-Wilton, has described the early flood of proposals as a “smorgasbord of options” that GOP leaders hope to merge into a final package.

Democrats pitch alternative

Iowa House Democrats have offered their own plan, which includes a 4 percent property tax cap, rebates for homeowners and renters, and a property tax freeze for seniors. Democrats have called for bipartisan negotiations as the session moves forward.

For now, Republicans say negotiations among the House, Senate and governor are ongoing, with all sides expressing confidence that some form of property tax reform can pass this year.

“The fact that you have seen proposals from the House, the Senate and the Governor show just how determined we are,” Nordman said. “While there may be three different proposals out there right now, I am confident that we'll be able to find common ground and accomplish property tax reform this year.”

Comments: (319) 398-8499; tom.barton@thegazette.com