Branstad hopes third try is “the charm” on Iowa property tax

Concerns over small businesses remain

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Gov. Terry Branstad called Tuesday for toning down the political rhetoric in an effort to enhance the chances that he and the split-control Legislature can forge a compromise agreement to deliver property tax reform this session after two failed attempts.

“This is not Washington, D.C.,” the GOP governor told reporters at a weekly news conference where he was asked about concerns lodged by Sen. Matt McCoy, D-Des Moines, that Branstad was attempting to “cram” his property tax approach “down the throats” of majority Senate Democrats.

“I’ve never worked that way,” Branstad said. “I’m going to be constructive. We all have to come together.”

The governor said he hoped 2013 would make “the third time the charm” but he expressed concern that the Senate’s tax credit approach did nothing for businesses that rent property and failed to cap the growth on residential and agricultural classes of property while providing relief to commercial property targeted to small and Main Street businesses.

Majority Senate Democrats are moving ahead with a proposed $250 million tax credit plan over five years that will enable all businesses to be taxed at a lower rate on the first $324,000 of their assessed property value. Commercial entities would have property values above that threshold taxed at the current 100 percent rate.

Branstad has offered a plan that would reduce the percentage to 80 percent over four years. The bill requires that a standing appropriation be made each year by the Legislature in the exact amount of reduced property tax dollars, to be given back to city and county governments. He also seeks to lower the amount that residential and agricultural classes of property could increase -- from 4 percent to 2 percent.

For their part, Republicans who control the Iowa House propose to provide relief to all property classes by having the state take over the full cost of funding the school aid formula. Currently, the state contributes 87.5 percent of the total cost of the K-12 school aid formula and the rest is funded by local property tax dollars. House File 2 seeks to increase the percentage the state contributes by 2.5 percent annually for five years.

On Tuesday, Legislative Service Agency analysts offered estimates that pegged the overall relief provided by the governor’s plan at $350 million to $390 million while the House GOP plan could go as high as $440 million in relief if next school’s allowable growth rate is 2 percent.

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