Gov. Kim Reynolds in her Condition of the State address emphasized the importance of finally addressing Iowa’s high property tax burden. The demand for property tax reform surpasses the rural, urban, and socioeconomic divide. High property taxes impact all Iowa taxpayers.
“Whether you live in a small town, growing suburb, or an urban neighborhood, you’ve probably felt it. Property taxes are rising faster than inflation, faster than paychecks, and faster than population growth,” stated Governor Reynolds.
The governor noted that “over the last two years, they’ve gone up more than 10%.” However, this has been a problem that has only accelerated. Over the past 20 years, property taxes in Iowa have increased by over 107%, which exceeds the growth of inflation and population.
Reynolds defined the cause of Iowa’s property tax problem and the solution. “So, this year, we need to go after the real driver of the problem: Spending. Spending is what drives taxes—always has, always will. And the most reliable way to protect taxpayers is to limit the growth of government itself,” stated Reynolds.
For that reason, the starting point for any sound tax policy discussion must be spending restraint. Governor Reynolds is calling for a 2% property tax cap, which would allow for new construction to be included. Interestingly, there is bipartisan consensus on the need to place a cap on property tax, but disagreement over the framework.
Already, even before the ink was dry on the bills being printed, local governments and media outlets were sounding all too familiar alarms that a 2% cap will be devastating to budgets.
Localities are arguing that this represents a draconian spending limitation, which will result in the reduction of vital services. The Des Moines Register’s editorial even went so far to argue that a 2% cap would result in catastrophe with an outbreak of potholes in roads and sewage backing up into basements.
“Hanging on to a few hundred dollars won’t mean much to Iowans if it also means they’re less safe or more susceptible to blowing a tire in a pothole or seeing sewage back up in their basements,” argued the Register’s editorial.
It is only in government that slowing the increase in government spending is viewed as a cut. Contrary to the Register, many Iowans probably would enjoy “hanging on to a few hundred dollars” resulting from property tax savings.
A 2% growth cap does not cut budgets or eliminate services. It simply slows the growth of property tax collections to a responsible, predictable level that better aligns with taxpayers’ ability to pay. In every other sector of the economy, slowing the growth of spending is considered prudent management; in government circles, however, it is treated as an unacceptable option.
“If you set that number so high, you’re basically just continuing status quo,” stated Speaker of the House Pat Grassley. Speaker Grassley understands that allowing for a higher percentage growth in collections will only result in greater spending. The same truth applies if exemptions are allowed, which will further weaken the cap.
“By putting a true two percent cap, (that’s) certainty for Iowans, also I think it will make our local governments become more efficient,” noted Grassley.
A reason prior property tax reform measures failed to provide any substantial tax relief is that they did not address spending. Property tax caps are not a radical idea. Progressive states such as Massachusetts and New York have adopted them. Both are high-tax states, and without their respective caps, taxpayers would be in far worse shape.
“We understand that there has to be some level of service at the local level…,but for too long, we’ve entered into this conversation without sitting in the taxpayers seat and answering our questions from that standpoint,” stated Grassley.
Finally, Iowa taxpayers have a seat at the table, and a 2% property tax cap is a prudent approach to start reigning in spending and ensure tax relief for all taxpayers.
Property tax reform that caps the growth of government is not radical. It is responsible. And it is the only way to provide meaningful, lasting relief to the taxpayers who fund it all.
