Iowa Legislature finds starting point for property tax debate

Plan to relieve commercial property taxes could impact all Iowa property owners

The rotunda outside the Iowa Senate and House chambers in February 2010. (Steve Pope/Freelance)
The rotunda outside the Iowa Senate and House chambers in February 2010. (Steve Pope/Freelance)

The finish line remains unknown, but House Republicans and Senate Democrats may have reached an agreement on a starting point for reforming Iowa’s commercial property taxes.

Senate Democrats are willing to commit $250 million toward property tax relief over a period of years, Senate Majority Leader Mike Gronstal, D-Council Bluffs, said over the weekend.

Meanwhile House Republicans are planning to debate their own property relief plan Feb. 14 to roll back commercial property taxes to 60 percent of assessed valuation, pick up 100 percent of the school foundation formula costs, accelerate tax relief to small business and provide $240 million as payments to cities and counties to make up for some of the commercial property tax money they’d lose.

“That’s our starting point,” said House Speaker Kraig Paulsen, R-Hiawatha. “I think it’s a serious starting point and I’ve told Sen. Gronstal that.”

He expects the House, where Republicans have a 60-40 majority, will send that message with passage of House File 2274 (formerly HSB 519).

Then, he said, let the negotiations begin.

“My hope is they will give our bill a fair hearing and make some suggestions back,” Paulsen said. “I’m under no illusion they are just going to send it down to the governor, but I would be disappointed if they didn’t give it some serious consideration and send it back.”

If it’s too bold for the Senate, added House Ways and Means Committee Chairman Tom Sands, R-Wapello, “then they need to take a look at it and pare back what they don’t like and we can continue the discussion.”

He’s optimistic the House, Senate and Gov. Terry Branstad can find common ground because “we all believe commercial property taxes need to be done this year.”

Branstad is “anxious and willing to work with Senate Democrats to ensure we can come together on a bill that addresses all classes of property, including residential and agricultural property, and relieve this burdensome tax for all Iowans,” his spokesman, Tim Albrecht, said.

Even if they agree on a starting point, however, there is little agreement on how to proceed. House Republicans say the Senate plan is too timid. It would provide relief via a direct commercial property tax credit to Iowa-based small businesses. Originally, the plan called for $200 million in relief, but Gronstal said his caucus is willing to add another $50 million.

Senate Democrats call the House GOP plan the largest tax shift in state history. They warn residential and ag land owners will pay more to offset the commercial property tax relief.

Branstad rejects that. Albrecht warned that if nothing is done “Iowans in all classes of property face an eye-popping $2.3 billion property tax increase over the next eight years.”

“That is unacceptable,” he said.

Another factor in the debate is public support for reducing property not just for commercial property owners, but homeowners as well.A Legacy Foundation found little support for either the Democratic or Republican plan. Instead, 51 percent of 600 Iowans polled said prefer a plan that cuts all property taxes even if city and county governments see their tax collections shrink.