Republicans and a few Democrats in the Iowa House have passed a bill that would reduce commercial and industrial tax rates by 10 percent over the next five years. .
The bill is the latest version of property tax reform to emerge at the statehouse. Representative Tom Sands, a Republican from Wapello, helped craft the proposal.
“This bill largely represents the framework of a lot of the discussion that has (gone) on (among) the House and the Senate and the governor’s office on trying to reach some type of consensus on different philosophical views on how best to proceed with property tax relief,” Sands said.
Sands expressed some frustration during tonight’s debate.
“Seems like everybody’s in favor of doing something on property taxes until it’s time to step up to the plate and swing the bat,” Sands said.
Many Democrats raised concerns about the GOP approach. Representative Mary Mascher, a Democrat from Iowa City, suggested with declining commercial property tax revenue, local governments would have to cut teachers, police and fire fighters.
“Our cities, our counties and our school districts have weighed in and have said, ‘Don’t jeopardize our ability to provide those basic services,’” Mascher said. “They are important. We need them. They make our communities what they are.”
Many other tax changes are included in the bill. The property taxes on apartments and condos would be lowered significantly. That sparked complaints from Democrats who argued the tax benefit won’t be passed along to renters. Representative Kurt Swaim, a Democrat from Bloomfield, suggested that kind of “trickle down economics” won’t work.
“It just seems to me that there are more direct ways to address that issue than attempting to lower the tax bill of the landlord and hoping that translates into a lower rental rate for the tenant,” Swaim said. Republicans countered that apartment owners are now shouldering significant tax burdens today, as the property is taxed at 100 percent of its value, while homes are taxed at about 50 percent.
If the bill that cleared the House last night becomes law, a tax credit for low-income Iowans would go up from seven percent to 10 percent of their annual income. The legislation calls for the state to provide money to cities to replace some of the lost commercial property tax revenue, but the bill also sets new restrictions on local government budgets, limiting local tax hikes to the rate of inflation. The bill provides direct property tax relief to home owners. It limits annual growth to three percent rather than four percent. The value of residential property is tied to ag land values. With the skyrocketing price of farms, property taxes on homes likely will go up four percent if the law isn’t changed.
The bill passed the House on a 71-25 vote and now attention swings to the Senate to see if Democrats accept the proposal as is, make major alterations, pass their own plan or refuse to act altogether.