Republicans in the Iowa House have embraced a plan to change Iowa’s property tax system and dramatically lower commercial property taxes.
“I think we can all agree that property taxes have been studied to death and it is now time for action,” said Representative Tom Sands, a Republican from Wapello who led debate on the bill.
Republicans promise to send millions in state support to local government to make up for some of the lost commercial property tax revenue, but Democrats say cities will be forced to collect more money from homeowners to make up for the 40 percent reduction in commercial property taxes. And Representative Jerry Kearns, a Democrat from Keokuk, said under the G.O.P. plan, five years from now up to $800 million of the state budget will be dedicated to property tax relief.
“You and I will pay for whatever relief that commercial property tax gets through your personal income tax, your business income tax and your sales tax,” Kearns said.
Representative Chuck Isenhart, a Democrat from Dubuque, said the bill is based on a “big assumption”.
“And that is a 40 percent commercial property tax break will result in increased economic activity and jobs,” Isenhart said, “creating enough new revenues to communities and the state to be able to afford the tax cut itself.”
Representative Greg Forristall, a Republican from Macedonia, said he expects “huge industrial development” along Iowa’s western border if the commercial property tax is cut by 40 percent.
“I believe this will be the biggest job-creating bill of this session,” Forristall said.
House Democratic Leader Kevin McCarthy of Des Moines warned in five years the state would be obligated to pay local governments up to a billion dollars under the G.O.P. plan. “And you wonder why local governments are nervous that we might not maintain our commitments under this bill,” McCarthy shouted near the end of House debate. “Good luck!”
Representative Sands, the bill’s primary advocate during House debate, responded to the critics.
“There’s a reason property taxes don’t get reformed very often is because of all the misleadings that go on and some of the fear that is put out there that the sky is going to fall if we reform the system,” Sands said. “Ladies and gentlemen of the Iowa House, if we do absolutely nothing we will see the biggest property tax increase the state has ever seen. Doing nothing is not an option.”
The Democratically-led Iowa Senate has endorsed another approach to commercial property tax relief, one that would provide a tax credit to small businesses. Republican Governor Terry Branstad made cutting commercial property taxes a cornerstone of his 2010 campaign.