Hendrickson: It’s time to solve the Iowa property tax problem | Opinion
Iowa property taxpayers are increasingly frustrated and they are tired of the blame game that is played by local governments to avoid answering why tax breaks are nearly impossible.
Property taxes fund local governments and often the blame is shifted from one tax authority to another as to why tax bills are high.
In addition, local governments also respond that if property taxes are reduced, it will result in cuts to essential services such as police, firefighters and emergency response services.
Since 2000, Iowa’s property taxes have risen 122 percent more relative to population, inflation, and the cost of living adjustment for Social Security.
The Tax Foundation has ranked Iowa as the 10th highest property tax in the country. As a property taxpayer, would you consider expressing your opinion on future tax increases if you had the opportunity?
Local government spending is at the heart of high property taxes. Too often, the blame is placed on the county assessor, but taxpayers must focus their attention on the expenses. Whether it is property taxes or income taxes, the expenses result in high taxes.
Additionally, many Iowa property taxpayers often wonder why they are told that taxes have gone down, but their property tax bills are higher. This is because many local governments can easily hide behind increased evaluations and reap the windfall while the evaluator takes the blame. This has created an “honesty gap” in property taxes. Without addressing local government spending, it will be difficult to implement property tax relief.
Property taxes are also a form of wealth tax. For example, if the value of a house has increased by 10%, that does not mean that the owner has a 10% increase in their savings to cover their property taxes.
Establishing a strong tax truth law will provide the solution that property taxpayers seek and force local governments to be more accountable to taxpayers.
Utah’s Tax Truth Act is considered the gold standard for property tax reform and is the most taxpayer-friendly property tax law in the country. Since 1985, the Utah Truth-in-Taxation Act has provided property tax relief by slowing the growth of property taxes.
Utah law is an income-based limitation, which means that as assessments go up, property tax rates go down. The law guarantees that each tax entity receives the same property tax revenues as the previous year, including new growth.
This prevents local governments from getting a windfall because valuations have gone up.
If a local government wishes to exceed the certified tax rate, then it requires a tax truth hearing accompanied by an extensive public notification and hearing process. The law also requires local government officials to conduct recorded votes to approve increased tax revenue.
Throughout the process, local governments have to justify why they want to raise taxes for additional spending.
A crucial aspect of Utah law is a direct notification requirement, where notices are sent to taxpayers, providing information about the proposed tax increase and its impact on their tax bill. It also includes the date, time and location of the Tax Truth Budget Hearing. This extensive process of public notification and hearing has been successful.
Rusty Cannon, president of the Utah Taxpayers Association, argues that Utah law provides “sunlight” on the budgeting process.
Cannon noted that while “decisions can be made to raise taxes, the law just requires it to be done in the sun – that you basically have to get your point across to voters, to taxpayers, about why it is. ‘increased income is needed’.
Truth in tax matters requires tax authorities to think twice before raising taxes.
âYou do it in a public place, you inform them of the increase in their liability package by package, so that everyone has this full disclosure. So there is no automatic inflation that takes place. There is no automatic increase. There is no automatic windfall if property values ââincrease. He keeps a lid on those property taxes. However, if they want to raise them, they just have to do it in this public process, âCannon said.
Kansas and Nebraska recently passed laws based on Utah Tax Truth. Kansas law is the closest example to Utah law because of its strength. Dave Trabert, president of the Kansas Policy Institute, says Kansas’ new law “bridges the honesty tax gap.”
âLocal authorities can no longer pretend to ‘hold the line’ on property taxes while accommodating large increases in assessment changes. Now they have to be honest about all of the tax increase they impose, âTrabert said.
Kansas law already works for taxpayers. More than 100 local tax authorities will not increase their property taxes next year while others consider small increases.
Public officials should not be afraid of fiscal truth. Providing more accountability and transparency will only improve local government.
In addition, elected officials should explain to taxpayers why they need the additional spending.
Too often governments at all levels forget that it is the money that belongs to the hard work of the taxpayer.
John Hendrickson is the policy director of the Tax Education Foundation of Iowa, a public policy think tank. He can be contacted at [email protected]