Go slow on property tax reform in Iowa

Republicans who run the Iowa Legislature are contemplating sweeping changes to the state’s property tax system. Ways and Means Committee chairs in both the House have 50-plus page bills with the goal of capping local revenue and delivering property tax relief to Iowans fed up with the current system.

Lawmakers have pledged a go-slow approach to passing legislation. We urge them to keep that promise, rather than ram through a bill in the final month of the 2025 session.

The proposal in its current form would have the state take over an additional $400 million of public-school funding over the next five years that otherwise would have been covered by property taxes.

Also, over the next five years, lawmakers would eliminate the state’s rollback system, which currently limits the portion of a home and business property values subject to tax. Some tax credits would also be eliminated.

Under the legislative plan, local governments, including cities, counties and school districts, could not increase property tax revenues by more than 2%, excluding new construction, unless they ask local voters for permission.

Every household under the proposal would receive a $25,000 homestead exemption. The property tax exemption for veterans would rise to $7,000. And Iowans 70 years old or older with income of less than 350% of poverty would receive a property tax credit.

Local governments are still assessing the plan’s effect. But it would undoubtedly reduce available revenue and could lead to budget reductions. Iowans would get property tax relief but might see some services reduced or eliminated.

Des Moines City Manager Scott Sanders told lawmakers his city increases public safety spending — 60% percent of its general fund budget — by 4% annually. So a 2% cap would slice into spending on police, EMS and fire protection “continuously with no end.” Sanders argued. It would also cut funding to the city’s transit system.

Funding another huge chunk of public-school aid with state dollars worries districts. Thanks to a series of income tax cuts, state revenues are declining. And districts would no longer have the flexibility to raise as much local revenue after the bill cuts property tax levies.

The future of Tax Increment Financing, or TIF, property tax-based incentives used to spur development projects, is uncertain. Losing TIF would take away an important tool in efforts to pursue economic development.

But ending Iowa’s rollback system has drawn positive reviews for simplifying the tax system.

Clearly, a bill with this many moving parts should not be rushed to passage by the time the Legislature is set to adjourn on May 2.

“If further conversations have to go on in the next year, I think we’d be open to that. But we also don’t want to, just because something’s hard, just throw our hands up either,” House Speaker Pat Grassley told reporters last month.

That’s good news, and we hope the speaker and other leaders will slow down the train.

We’re leery of the impacts to local communities, and explanations of the changes haven’t provided enough detail to fully understand the potential effects. Working on the proposal between sessions would leave time for more voices at the table.

We appreciate the need for property tax relief. But let’s make sure we get it right.

(319) 398-8262; editorial@thegazette.com