A House committee has begun public meetings to examine a bill that would gradually reduce taxes on commercial and industrial property in Iowa.
The bill is a sort of merger of plans advanced by House Republicans and Republican Governor Branstad. Representative Tom Sands, a Republican from Wapello, says after talking for the past two decades about making changes in the property tax system, it’s time for action.
“It is exciting that there are a lot of different groups that see that there is a problem out there,” Sands says. “They see this as a possible solution.”
Commercial property owners now pay taxes based on 100 percent of the assessed value of the property, while homeowners pay taxes on about half the assessed value of their residence. John Gilliland of the Iowa Association of Business and Industry says commercial property taxes have “spiralled out of control” in the past decade, increasing by $1.75 billion.
“I would submit to you that when this legislature talks about job creation and wanting to get the economy moving forward, property tax for commercial and industrial property taxpayers really is the white elephant in the room,” Gilliland says.
Alan Kemp of the Iowa League of Cities says some of that growth, however, is property taxes collected from new businesses and business expansions. And Kemp says rolling back property tax obligations by 40 percent over five years would be a $500 million hit to city budgets.
“It takes too much valuation out of the commercial side too fast,” Kemp says.
Ed Wallace of the Iowa Taxpayers Association praised Republican legislators and the governor’s office for working “behind the scenes” to “meld” pieces of Branstad’s proposal with the one from House Republicans.
“It is our strong feeling that now is the time and this is the vehicle for meaningful property tax relief,” Wallace says.
Democrats like Representative Dave Jacoby of Coralville complain it’s a deal developed by Republicans with no input from Democrats.
“Behind the scenes meeting?” Jacoby asked during a public meeting today at the statehouse. “I must have missed my invitation.”
A five-member panel of legislators began reviewing the bill in public this morning. The full House Ways and Means Committee is scheduled to consider the plan early this afternoon. Not only does it outline a way to dramatically reduce commercial and industrial property taxes, it also gives a boost to residential property owners by gradually increasing state support of public schools, essentially replacing property taxes with income taxes, sales taxes and other taxes paid to the state.
Nearly a year ago, when campaigning for a fifth term as governor, Terry Branstad proposed cutting commercial property taxes substantially.