Why We Must Reform Iowa Tax System Now: Raecker Report 2/10

Property tax reform has been studied and debated for the last 30 years.

In a complex system, residential property taxes are “rolled back” to a rate of 48% of assessed value in a formula tied to agricultural productivity.  Since agricultural productivity has increased in the last several years, residential property taxes will see a significant increase if the Iowa Legislature does not take action this session.

In addition, commercial property in Iowa is taxed at 100 percent of assessed value and that is a major drawback to attracting and keeping businesses of all types and sizes. The 2010 Business Tax Index ranked Iowa’s business tax climate 46^th out of 50 states.

Over the last ten years, property taxes collected on a statewide basis for schools, counties and cities have increased more than 60%, or over $1.7 billion dollars.

Current projections indicate that over the next 10 years property taxes paid by homeowners will increase from $2.3 billion in 2012 to $3.9 billion in 2022 – a 73% increase.

These factors require the legislature and governor to take action this session to reform the property tax system.

The current proposal is a comprehensive plan with the following principles:

• Rollback commercial property taxes from 100% to 60% incrementally over an eight-year period with small businesses seeing the greatest benefits first, then large businesses seeing the same benefits by year eight.
• Increase the regular school foundation formula from 87.5% to 100% over an eight year period. This will help prevent a shift to residential taxpayers and provide homeowners with dollar-for-dollar property tax relief.
• Align local government spending with the rate of inflation plus new growth. Local budgets would be tied to a Midwest CPI index, plus net new growth and align their spending with the income growth for those who pay for the services.
• Provide backfill dollars for local governments that don’t see growth, to help them adjust and allow local governments to exceed their budget by a vote of the people.

It’s a bold plan, and one that would help spur growth, provide property tax relief to all classes of property while allowing local government budgets to continue to grow at a sustainable pace.

Talk to Your Elected Officials

The Urbandale Chamber of Commerce partners with state Sen. Brad Zaun and me, along with officials representing the city, county and Urbandale schools, to offer several opportunities for public input.  This year we have four public forums set that will take place at the Chamber Office at 2900 Justin Drive, Suite L. Please join us on:

Saturday, February 25 - 10:30 am to noon
Saturday, March 31 - 10:30 am to noon
Saturday, April 28 - 10:30 am to noon