October 24, 2014

Breakthrough on property tax reform (audio)

Democratic leader Mike Gronstal.A key legislator is advancing a plan that would reduce commercial property taxes in Iowa by 25% over the next five years. Senate Democratic Leader Mike Gronstal discussed details of the plan with reporters late this morning. (Find the audio here.)

“I believe when it’s totalled the impact on businesses in the state of Iowa would be in the range somewhere north of $350 million,” Gronstal said.

Legislators and Governor Branstad have been in negotiations over a property tax reform plan for the past 16 months, and Gronstal indicated the plan he unveiled today is a breakthrough.

“That will be the most significant cut in commercial property taxes in the history of the state,” Gronstal said. “We think that will help encourage job creation in this state.”

A state law passed in the 1970s created a property tax system where commercial property now is taxed at 100 percent of its assessment, while residential property is taxed at less than half its assessed value. Gronstal said the problem was 34 years in the making and the final package is a combination of priorities from both political parties.

“We think we’re within an eyelash of getting something finally done on that,” Gronstal said, “that does it in a way that minimizes any burden on local governments and also does it in a way that doesn’t create major tax shifts to other tax payers.”

Under this plan, the state would set aside tax money that would be paid back to local governments to cover some of the commercial property tax losses. The tax reduction on commercial property would begin in 2013 for taxes paid in 2014. Gronstal described the package as “middle ground” in this long debate about property tax reform.

“I haven’t yet received an endorsement, but I’ve heard positive remarks from the executive branch,” Gronstal said, a reference to Republican Governor Terry Branstad. “…My perception has been is that the House is receptive.”

Republicans control the House debate agenda and Gronstal, the top Democrat in the Senate, met privately earlier this morning with the top Republican in the House. The plan would reclassify apartments and condos as residential rather than commercial property– meaning the tax rate would be significantly lower. And it includes a tax cut for low income Iowans by increasing the so-called Earned Income Tax Credit.

Some of the final calculations are still being made, according to Gronstal, but he said the entire plan should be public “by the end of today.” With this breakthrough on property tax reform, Gronstal said it’s possible the 2012 legislative session could wrap up sometime in the middle of next week.

“Would I be upbeat if I didn’t see significant progress being made?” Gronstal asked reporters. “And significant progress is being made.”

Some key decisions on the state budget have been made, like how much to spend on the state’s public universities, but there are still elements of the state budget which haven’t been ironed out. Most notable is a partisan disagreement over abortion policy.