September 23, 2021

Hendrickson: Time to fix the Iowa property tax problem

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. Iowa’s property taxpayers deserve a solution, and luckily, a solution exists that will place greater transparency and accountability on local governments. Establishing a strong tax truth law will provide the solution that property taxpayers seek and force local governments to be more accountable to taxpayers.

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 ranked Iowa as the 10th highest property tax in the country.

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.

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.

Source: Tax Foundation (Note: Iowa is ranked 10th in the country)

Utah’s Tax Truth Act is an income-based limitation, which means that as assessments go up, property tax rates go down. The Tax Truth Act ensures that each tax entity receives the same property tax revenue as the year before, including new growth. This prevents local governments from getting a windfall as valuations have gone up. “Local governments shouldn’t receive an automatic 12% increase in revenue just because property appraisals have increased 12%,” wrote Howard Stephenson, who recently retired as president of Utah Taxpayers Association and is a former State Senator.

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. Tax truth also requires local government officials to conduct recorded votes to approve increased tax collections.

Through the Truth in Taxation process, local governments must justify why they want to raise taxes for additional spending, forcing them to be more transparent about why they need additional tax revenue. 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 public notification and hearing process has been successful, and Utah taxpayers are actively participating in tax truth hearings.

Rusty Cannon, president of the Utah Taxpayers Association, argues that Utah law provides “solar light” on the local government 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, taxpayers, about why it is. ‘increased income is needed’.

Truth in tax matters requires tax authorities to think twice before raising taxes. “You do it in a public place, you inform them of the increase in their liability package by package, so that everyone has that full disclosure. So there is no automatic inflation that takes place. There is no automatic increase. There is no automatic windfall if property values ​​increase. 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, ”Cannon said.

Describing the success of Utah’s Tax Truth Act, Jonathan Williams, chief economist at the American Legislative Exchange Council, wrote:

“Utah’s Truth Tax Act has effectively controlled the growth of its property tax assessments and overall burden. The law requires citizens to be notified of the intention to raise taxes and invited to a public hearing to voice their concerns. It also allows local government units to advocate for their case if they feel that additional income might be needed. If a local government decides it wants to increase spending, the Truth in Taxation process requires local elected officials to conduct recorded votes to authorize new rates or assessments.

Recently, Kansas and Nebraska passed property tax reform 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.” “Local 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 the overall tax increase they are imposing, ”Trabert said.

Specifically, Kansas law repeals the property tax cover, which was largely ineffective due to the many exemptions, and starting in 2021, thousandth rates will be reduced so that new assessments report the same amount of tax. property tax. If a tax authority wishes to increase property taxes, it will need to hold a public hearing and vote on the potential increase. This also includes a direct notification process, which should include:

  • The revenue neutral rate for each relevant tax subdivision;
  • The proposed tax rate and the amount of tax revenue to be levied by each tax subdivision seeking to exceed its neutral tax rate;
  • The tax rate and tax amount of each tax subdivision for the property of the previous year’s tax return;
  • The estimated value and the assessed value of the property of the taxpayer for the current year;
  • The estimated amount of tax for the current year for each subdivision based on the neutral tax rate and any tax rate above the neutral tax rate and the difference between those amounts for any tax subdivision seeking to exceed its neutral tax rate;
  • The date, time and location of the public hearing for each tax subdivision seeking to exceed its neutral income rate; and information regarding the factory levies imposed by the State of Kansas.

Kansas’ tax truth law already works for taxpayers. Several cities and counties will not increase their property taxes next year, while others are considering small increases.

Policymakers in Iowa should seriously consider following the example of Utah and Kansas and adopting a tax truth measure that requires a strong direct notification requirement. Taxpayers deserve to know how much their property tax bill will go up, and Utah and Kansas are showing that tax truth laws impose more “sunlight” and accountability on the local government budget process.

PUBLICITY

Public officials should not be afraid of fiscal truth. Providing more accountability and transparency will only improve local government. “Just as someone who doesn’t want to be seen in a swimsuit should avoid the beach, those who don’t want to make decisions in public shouldn’t run for office,” Cannon said, referring to transparency in the election. within government.

“And that’s the idea behind Truth in Taxation, is that you can make the decision, you just have to do it in the open,” Cannon noted. 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.

In recent years, Gov. Kim Reynolds and the legislature have made significant strides in starting to lower Iowa’s high tax rates. Much remains to be done to reduce personal and corporate income taxes to make Iowa’s economy more competitive. The same is true for property taxes. High property taxes discourage economic growth and cause people to move or decide not to move to Iowa.

It’s time to implement a proven solution to bring property tax relief to Iowa taxpayers. Other reforms such as freezing property taxes for some taxpayers or appraisal limits may look promising, but these “fixes” will not solve the problem. The goal should be property tax relief for all Iowans and tax truth will benefit all taxpayers.


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