Low-income areas pay more in property taxes

Iowans and private entities in lower-income areas pay more in property taxes than those in wealthier areas, a report issued by Iowa Auditor of State Rob Sand found.

In a news conference Tuesday, Sand said the report was the first review of Iowa’s property tax rates across the state in comparison to local income. The review documented the overall levies for every tax district — consolidated rates based on the levies of municipal, county, school district and other taxing entities — and compared those with the median household income in each district based on U.S. Census Bureau data.

The office found a correlation between higher income and lower property tax rates in Iowa. According to the report, every $1,000 increase in an area’s median household income is associated with a 10.6 cent decline in overall property tax rate.

Sand says this shows that Iowa’s property tax system is a “regressive tax,” an assertion he said was long suspected but had not been confirmed before the report. The fact that lower- and middle-income Iowans pay a higher percentage of value into property taxes than wealthy Iowans is important to keep in mind while looking at further property tax changes, he said.

“Obviously, property taxes are something that the Legislature is looking at on a regular basis,” Sand said. “They’re changing the formula, changing the rules around them, and yet no one has actually addressed this question. No one’s actually answered this question before, which I think is an important one.”

Sand said his office is not making policy recommendations based on this report. He also said the impact of the $100 million property tax cut signed into law in 2023 remains unclear. The law included levy rate caps for cities and counties, as well as property tax exemptions for veterans and seniors.

Sand says 2023 law has created ‘roadblocks’

While he said he hopes the report will inform lawmakers’ policy proposals on property taxes, Sand said he has not held meetings with legislators on the topic. He said the resistance legislative leaders showed toward meeting with his office as a law restricting the auditor’s access to information and subpoena power advanced during last year’s session indicated there may be “better uses of our time” for his office.

Sand is the sole Democrat to hold a statewide elected office following the 2022 midterm election. Republicans also control both chambers of the Legislature, holding a supermajority in the Iowa Senate. Though Republicans supporting the 2023 measure said it addresses legitimate public policy concerns, members of the minority party said the restrictions to the auditor’s office were politically motivated.

The state auditor said while he cannot share specific details about how the new law has impacted his office, he said “there have been roadblocks” in getting information during some audits. Details on those issues will be released with a report of the audit, he said.