Iowa GOP lawmakers unveil $426M property tax overhaul. Here’s what it would do

DES MOINES — Iowa property owners would save a combined $426 million over five years, statehouse Republicans say, under their proposal to drastically overhaul the state's property tax system.

Rep. Bobby Kaufmann, R-Wilton, and Sen. Dan Dawson, R-Council Bluffs, introduced the proposal Thursday at the Iowa Capitol.

Kaufmann and Wilton chair the tax-writing committees on Ways and Means in the Iowa House and Senate. They filed their proposal in companion bills, Senate Study Bill 1208 and House Study Bill 313.

The bills — among other provisions — would:

Kaufmann and Dawson told reporters Thursday the proposal represents the biggest overhaul to the state’s property tax system since the 1970s.

“This proposal is the biggest overhaul to the property tax system in decades, puts Iowa homeowners first, brings much needed relief to property taxpayers, and puts restraints on local governments to limit spending while the system is updated and modernized,” Kaufmann said.

Dawson said the legislation builds upon a 2023 property tax bill he said exposed large gaps in Iowa’s property tax system and set the stage for deeper reforms.

“We heard a lot from Iowans that rising property taxes continued to be an issue in their communities and are looking to the Legislature for solutions,” Dawson said. “This solution, I believe, Iowans will support, cities and counties can support, and I am looking forward to the continued conversation about how we can rebuild this entire system to make it simpler and fairer, prioritize Iowa property taxpayers and their families, and help make Iowa a more competitive state.”

Statehouse Democrats said Iowans should be skeptical about Republicans’ latest property tax plan.

“Over the last decade, every attempt by GOP lawmakers to fix Iowa’s property tax system has failed,” Rep. Dave Jacoby, of Coralville, the ranking Democrat on the House tax policy Ways and Means Committee, said in a statement. “Property taxes just keep going up every year, especially for homeowners. House Democrats believe we need to put money back in the pockets of homeowners and renters immediately.”

Rollback calculation to be eliminated

The rollback rate is a statewide rate set annually by the Iowa Department of Revenue for each property class.

The mechanism has been in place in Iowa since 1977 and limits how much aggregate taxable value can grow statewide each year to 3 percent. If the statewide increase in values of homes and farms exceeds 3 percent, their values are "rolled back" so that the total increase statewide is 3 percent. A rollback also is available for industrial and commercial property when necessary. The rollback is applied on a class of property, not an individual property, meaning that the statewide total taxable value can increase by only 3 percent due to revaluation.

Eliminating the rollback would make the property tax system fairer and easier to understand for taxpayers, Kaufmann and Dawson said, while phasing in revenue growth restrictions to prevent rising property tax bills.

Incorporating an adjustment between new construction and revaluation growth would also help local governments meet increased demands due to growing population and new businesses and allow for better planning, the pair said.

Getting rid of the rollback would give local governments more predictability to budget years in advance, Kaufmann said, as they would no longer have to wait until December for the rate to be calculated each year to begin the budget process.

"I think that's one of the best parts of this bill from a local government perspective," he said. "You can now budget out one, two, three, four, five years in advance without that rollback, which they could not do right now."

Kaufmann and Dawson said the proposal levels the playing field between urban and rural areas of the state by updating revenue limitations passed in 2023 to a more predictable formula, and updates the school aid formula to help both property-rich and property-poor districts.

In 2023, lawmakers passed and Reynolds signed House File 718, aimed at reducing future tax bills. Republicans estimated the changes would save taxpayers $100 million.

That proposal earned strong bipartisan support.

Among the law’s many provisions were limitations on local governments’ collection and use of several tax levies devoted to specific purposes, such as for public library operations. HF 718 rolled the dedicated tax levies into cities’ and counties’ overall general tax rate, which are capped. So the dedicated tax levies are now budgeted alongside all other services and must compete with them for funding.

The law also limited the amount of new tax revenue local governments can capture from a growing tax base, and required certain information about property taxation to be provided to taxpayers and property owners.

The bill set triggers to reduce local property tax levies by certain amounts if valuation growth is 3 percent or more.

While the law was meant to prevent cities and counties from seeing a windfall from rising property assessments, those with growing populations, new housing and industries are left to figure out to how extend public services to more people without being allowed to fully tap into that same growth.

Lawmakers promise ‘thoughtful process’

The pair said the new proposal is meant to create a more efficient property tax system by moving away from a system focused on tax credits.

“We're spending hundreds of millions of dollars on these credits right now. Without their existence, we can reappropriate those dollars for direct property tax relief,” Kaufmann said.

He and Dawson stressed that the bill is not a finished product.

Kaufmann said he does not intend to schedule a subcommittee hearing on the bill for at least the next two weeks to give local governments, school districts, businesses and other stakeholders time to study the legislation and provide feedback.

"This will be a thoughtful process that will take up most of the rest of session to make sure that we get it right and understand all the impacts," Kaufmann said.

Iowa House Minority Leader Jennifer Konfrst, D-Windsor Heights, said that any proposal must ensure that property tax cuts do not lead to increased taxes elsewhere and not handcuff local governments’ ability to function and make decisions for their communities.

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“I think that the most important thing is that Iowans need to see some relief,” Konfrst told reporters. “Instead of a complicated bill that moves the shells around and taxes are going up one place and down another place, we need to make sure that Iowans will know after this bill is passed that their property tax bill is lower.”

Iowa Senate Democratic Leader Janice Weiner, of Iowa City, echoed Konfrst’s comments. The pair spoke with reporters Thursday during a news conference before the bill was publicly available.

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“So in addition to making sure that any property tax reform helps middle-class Iowans and not the wealthy, it needs to take account of our localities, our counties and our cities and towns and school boards and absolutely make sure that they have a seat at the table,” Weiner said.

Erin Murphy of The Gazette’s Des Moines Bureau contributed to this report.

Comments: (319) 398-8499; tom.barton@thegazette.com