Tax relief: One plan will never fit all

By Quad-City Times

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If Iowa Gov. Terry Branstad's aim is to reduce the tax burden for the largest commercial property taxes, some of the Iowa Quad-Cities largest businesses already could say, “mission accomplished.”

Owners of thousands of small Iowa businesses can declare no such victory. But for some of the largest commercial property tax rate payers in Davenport, a bill pending in the Legislature will provide windfall reductions to tax bills that already have gone down or stayed flat over the past 10 years.

Our slow-growth economy and, in some cases, legal challenges to assessments, have reduced the assessed property values for NorthPark Mall, Deere & Co., and some of Davenport's largest commercial taxpayers. Branstad's bill would trim 8 percent from commercial property tax assessments in each of the next five years, totaling 40 percent. Those reductions will translate into lower property taxes paid by commercial businesses to cities, schools and counties.

The governor believes those tax cuts will fuel enough growth and new hires to replace about half the lost revenue for local governments and schools. The Legislature would make up the other half with annual appropriations to those cities, counties and school districts.

We've not found anyone in an Iowa city, county or school district governance who is buying it. The Iowa Legislature has a poor track record for following up on such funding promises. And the commercial growth Branstad is counting on would be unprecedented in Iowa history.

Clearly Iowa needs relief for commercial tax rate payers, who have been paying full freight, while agriculture and residential taxpayers enjoyed discounts provided by caps on assessment increases. But Branstad's plan wagers the futures of local schools and government on the thin promise of tax-cut inspired growth that Iowa never has experienced. It didn't happen when the Legislature cut the machinery and equipment tax for commercial businesses.

That leaves Branstad's tax cut plan largely paid for by cuts to schools, cities and counties. Davenport Finance Director Alan Guard says Branstad's plan will definitely cut $2 million from Davenport's property tax revenue the first year, and a cumulative total of $35 million in cuts by 2016.

Branstad's insistence on a one-size-fits-all approach to commercial property tax reduction treats big corporations the same as small businesses and entrepreneurs. But as we've seen in Davenport, some of those big corporations seem to be managing their property tax bills just fine.

Rather than load up all of the tax relief in the commercial assessment discounts, perhaps the Legislature can put a larger portion of the relief into credits and incentives for small Iowa businesses that expand and add employees. Instead of committing the Legislature to make up the property tax losses to cities, counties and schools, lawmakers can consider tax relief incentives directly to smaller businesses planning for growth.

As we've seen in Davenport, the commercial tax experience of all businesses is not the same. The governor's tax relief plan should reflect that reality.