Iowans have long despised property taxes, and they aren’t going to develop any warm and fuzzy feelings about them any time soon. Local governments are collectively cranking up their property tax collections by more than 6% as cities (+6.6%), counties (+7.6%), and school districts (+5.4%) across Iowa begin a new fiscal year this month. Since most Iowans probably cannot look forward to a 6% raise next year, that means elected officials have decided to grow local government budgets faster than the budgets of the families and businesses who will be footing the bill. Government spending is clearly driving higher property tax bills.
It doesn’t have to be this way for taxpayers. Iowa’s legislature should implement a strict 2% cap on the annual growth of local government property tax collections. In contrast to other solutions that have been discussed in recent years, this approach would avoid disrupting the market’s role in determining property values or giving benefits to one group of taxpayers at the expense of another. Local governments in Iowa need to be fiscally disciplined. Both New York and Texas, despite their political differences, have successfully instituted hard caps on the growth of local property taxes.
ITR Foundation has published research that outlines the growth of property taxes year-over-year for every city, county, and school district in the state. A 2% cap would have saved Iowans $250 million this year alone. Not only would a 2% cap deliver real savings, but it is a solution Iowans of all political stripes can get behind. Polling released this month demonstrates that 70% of Iowa voters support this taxpayer protection, including strong majorities of Republicans, Democrats, and Independents.
One of the dynamics that has led Iowa to this situation is some local officials pointing to “growth” as the reason their spending has gone up so quickly. In order to examine the growth argument, our Foundation’s research also measured property tax increases in light of population (and enrollment) changes and calculated a per capita change for each jurisdiction. Dallas County, for instance, is increasing its property tax collections by 27% in this new budget year. Even for Iowa’s fastest growing county, that still equates to a property tax increase of 23% for every resident; growth alone does not seem to justify that sort of tax hike for so many Central Iowans.
A 2% cap would still allow for reasonable budget increases. If additional spending is necessary, the cap could be exceeded, but only with voter approval. This requirement ensures that any proposed spending hikes are thoroughly justified to the public, fostering transparency and accountability. By instituting such a cap, Iowa can ensure a balanced approach to property tax growth, promote fiscal responsibility, and maintain fair and predictable taxation for all residents.
Local governments should not rely on Iowa’s legislators to subsidize their spending. Utilizing state revenue for property tax relief has consistently failed. Iowa introduced income and sales taxes in 1934 to provide property tax relief, yet 90 years later, Iowa’s property tax system remains one of the worst in the nation.
The rapid increase in property taxes across Iowa is unsustainable. A 2% cap on the annual growth of local government property tax collections is a practical solution that resonates with voters. This cap would not only curb the excessive growth in property taxes but also align local government budgets more closely with the financial realities of Iowa's families and businesses. Iowa has an opportunity to protect its taxpayers from steep tax hikes, promoting accountability and a fairer, more predictable property tax system for all Iowans.
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