Senate panel approves Democrats’ property tax relief plan

DES MOINES – A Senate panel gave unanimous support Tuesday to a commercial property tax reduction plan targeting relief to job-generating small businesses.

The Senate Ways and Means Committee endorsed majority Democrats' plan to provide $50 million in permanent tax relief beginning in July 2012 by establishing that the first $32,000 of assessed value for commercial and industrial property would be taxed at the same rate as residential homes. That could provide an average of nearly $600 per commercial parcel in the first year, with the program to grow incrementally by $50 million for four years with a proviso that yearly state revenue would have to grow by at least 4 percent to trigger the relief.

“We believe it's a very responsible proposal,” said Sen. Joe Bolkcom, D-Iowa City, committee chairman and manager of Senate Study Bill 1205. “It's really a pretty simple idea and focuses on Main Street businesses. We believe it's sustainable. We think it's doable.”

Bolkcom said the advantage of the Senate approach over other commercial property tax relief plans offered by Gov. Terry Branstad and majority House Republicans is that it doesn't shift tax burdens to other property classes and hurt local governments while targeting relief to small businesses that are “the taxpayers who need it the most.” He said the overall relief could grow to $200 million by fiscal 2016 but it would not put the state in a bind if the economy sours or state revenues bog down.

Sen. Brad Zaun, R-Urbandale, ranking committee member, said he viewed the Senate plan as an opening bid in a negotiating process that could net a tax relief package that includes elements of all three proposals that have been offered to the split-control Legislature.

“I think it's good that everybody's coming to the table to reduce commercial property taxes. It's the first time that's happened in 12 years,” said committee member Sen. Randy Feenstra, R-Hull. “I think it's a start as a negotiating tool.”

Sen. Herman Quirmbach, D-Ames, called the Senate plan fiscally responsible. Backers said it would function similar to the homestead tax credit with businesses applying for the tax break through their local county assessors.

Ed Wallace of the Iowa Taxpayers Association said he was encouraged that all the player in the political process appeared committed to providing some form of relief to commercial and industrial property owners this session.

Branstad has proposed establishing a commercial property tax rate at about 60 percent of the current level for new business startups and expansion, and gradually phasing down the commercial property tax rate for existing businesses over a period of five years to get to a like amount. The governor also proposed to lower and cap the tax rate for agricultural and residential property classes.

House Republicans have approved a different approach that would eventually have the state paying 100 percent of the state school aid formula and would equalize commercial property tax rates with agricultural and residential classifications.

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