Governor Branstad says he’s “very encouraged” that Senate Democrats have unveiled for cutting commercial property tax rates is progress.

Branstad, a Republican, has proposed reducing commercial property taxes by 40 percent for new businesses or businesses than expand. Senate Democrats propose targeting the property tax reduction to small businesses. 

“We need to reduce the commercial property tax to make Iowa more competitive, so I look at this as a very positibe development,” Branstad says. 

Commercial property in Iowa is taxed at 100 percent of its value, a significantly higher rate than is charged on farmland or on housing.  Branstad says both Republicans and Democrats recognize it’s an inequity that must be addressed.

“Nothing has been done about this for 30 years,” Branstad says. “It’s critically necessary. We’re very uncompetitive.” 

Senate Democrats propose a tax cut that would ensure Iowa businesses get a break of at least $600 on their property taxes next year, and they call is “responsible” tax relief targeted to small businesses.  While key statehouse Republicans haven’t ruled out the Democrats’ plan, Branstad and other Republicans would like to see larger businesses that have significantly higher property tax bills see larger reductions.  

 “We stick out as a sore thumb as having second-highest commercial property tax in the country,” Branstad says. “That’s got to change.”

Branstad has proposed setting the commercial property tax rate for new business startups and expansion at 60 percent of the property’s value — and gradually phasing down the commercial property tax rate for existing businesses over the next five years.

A third approach from House Republicans would eventually equalize the property tax rates for all kinds of property: commercial, agricultural and residential. To do that, House Republicans would use far more state income taxes to run Iowa’s public K-12 schools rather than use any property taxes for general school operations.  Property taxes would still be used to finance school building construction.