A reach for Rolaids: City Hall-backed legislative proposal draws reaction from tax-relief group

Iowans for Tax Relief is reaching for the Rolaids.

The tax watchdog group based in Muscatine is reacting to legislation introduced late this week at the Iowa Statehouse, which its authors say is designed to give local city governments more freedom to craft a package of taxes and fees to pay local government's bills.

Cedar Rapids City Hall is a proponent of the new tax legislation, which is also intended to achieve what the Statehouse has said for several years is a legislative priority - reducing the burden of property taxes on commercial and industrial property owners.

Residential property owners in Iowa pay tax on less than half the value of their property based on a state formula tied to the value of agricultural production. Meanwhile, commercial and industrial property taxpayers pay tax on nearly all or all of the value of their property.

Tyler Olson, D-Cedar Rapids, introduced the new tax proposal this week, which is a late-inning move in a Legislature that will complete its business this session in the next few weeks.

Iowans for Tax Relief doesn't mince words. It says the legislative proposal "would bury" middle-income and low-income Iowans with new taxes in an effort to reduce taxes on commercial and industrial property.

The tax group embraces part of the proposal: "Make no mistake, Iowans for Tax Relief SUPPORTS efforts to reduce property taxes on commercial and industrial property," the group says in its newsletter, "The Watchdog."

But Iowans for Tax Relief says the proposed legislation, House File 2671, would "rob Peter to pay Paul" by shifting tax burdens while doing nothing to limit the growth of local government.

The proposed legislation - City Hall leaders in Cedar Rapids have been pushing for the general concept of the bill for a year or more - calls for a pilot project in up to 10 cities. It would give cities the ability to add a 1-percent local option sales tax without referendum, a franchise fee of up to 5 percent on utility bills, a tobacco tax, a police and fire services tax, an increase in the hotel/motel tax and more.

Giving local government such authority is intended to create a tax shift. The desire by propoents, in part, is to bring  in revenue from those now using city services but not contributing to the cost of them. Both those who work, shop and play in a city but live elsewhere would pay a piece of the new taxes as would non-profits, other than religious institutions, that don't pay property taxes.

The legislative proposal calls for all money raised by the new taxes to be used to lower property taxes.

 However, Iowans for Tax Relief said the proposal is not a dollar-for-dollar shift in the tax burden because cities could still raise their property-tax levies in anticipation of having to lower them by the size of the incoming revenue from the new, diversified sources.