Iowa Gov. Reynolds will take more active role in property tax reform

JOHNSTON — Iowa Gov. Kim Reynolds plans to focus on property taxes during next year’s legislative session — and spend the months in-between working on the topic, the governor said Friday.

The 2025 session of the Iowa Legislature concluded recently without passage of a bill addressing property taxes — despite the topic being a primary issue for many lawmakers, including leaders in the Republican majority.

Reynolds discussed the topic and others Friday while recording her appearance on this weekend’s episode of “Iowa Press” on Iowa PBS.

Reynolds, who has been Iowa’s governor since 2017, announced earlier this year that she does not plan to run for re-election in 2026.

“I do need to focus on property taxes. That is what we hear about all the time,” Reynolds said Friday. “I was hopeful that the legislature — they had kind of asked to take the lead on that this year, so we let them. I worked on other things, and we just — it’s hard. It is really, really hard.

“But I am going to spend the entire interim working on that, and I am going to be out in the state, and I am going to be talking to Iowans and stakeholders and laying out what it looks like.”

Republican Iowa Rep. Bobby Kaufmann, of Wilton, and Sen. Dan Dawson, of Council Bluffs, worked on property tax policy throughout the session. The two lawmakers are the respective chairmen of the House and Senate Ways and Means Committees that write tax policy. Kaufmann told reporters during the final day of the session that he felt the legislation he and Dawson produced was “80 percent there.”

On Friday, Reynolds said the property tax discussion going forward must include a discussion about government services — she said she and lawmakers will “have to put it all on the table” and noted Iowa’s complex systems for property taxes, school funding and tax incentives.

Property taxes are the primary revenue source for county, city and school governments.

“We have to think differently about how we deliver services to our citizens. We can’t continue to have the level of government that we have and expect the property taxes to go lower. It’s just not feasible. The math doesn’t work,” Reynolds said. “So everything needs to be on the table. We need to talk about what that looks like and how we move forward and what is their priority. Do they want to operate like we’ve done for the last 40 years? Or do they want to really, significantly, take a look at reducing those property taxes and thinking about how we can take advantage of those (services) differently.”

Reynolds said she has asked her DOGE Task Force on government efficiency to also look into property taxes.

“I’ve asked the Iowa DOGE committee, I said, ‘Take a look at this. As an entrepreneur, as a small-business owner, give us some ideas on how government should operate that would really make us stronger and more competitive,’” Reynolds said. “But that is the one thing that we hear about all the time from Iowans, is just the increased (property) evaluations exceeding inflation.”

Reynolds on Friday did appear to rule out one potential element of property tax reform that was in the legislation produced by Dawson and Kaufmann: shifting some of the school funding burden from local property taxes to the state’s general fund budget.

“I don’t think you can shift everything to the state,” Reynolds said. “It’s still taxpayer dollars. I always say it’s local, federal, state — it’s all coming out of the taxpayer’s pocket. So we have to figure out that system, how we holistically look at the package moving forward. And that’s just disruptive, but that means people are going to probably be a little uncomfortable.

“But we’ll have the conversation, and I’m not going to wait until January to have it. We’re going to have it all summer as we’re working on it.”

Reynolds on further income tax cuts

At an event in the nation’s capital in 2023, Reynolds said she wanted to eliminate Iowa’s income tax by the end of her term, which effectively ends in December 2026. On Friday, Reynolds conceded such a move, at this point, “would be aggressive.”

Reynolds and legislative Republicans have gradually and significantly reduced Iowans’ state income taxes, from rates of 0.36 percent to 8.98 percent over nine income brackets in 2018 to, starting this year, one 3.8 percent rate for most workers.

The shift has been projected to save Iowa state income taxpayers — and thus reduce state revenues — $1.7 billion by the 2028 state budget year.

Because of those state income tax reductions, state revenue this year fell short of planned spending for the state budget year that begins July 1. As a result, majority Republican lawmakers crafted a budget that used more than $927 million from state reserve accounts — $464 million each from the Taxpayer Relief Fund and the general fund budget surplus.

“That would be aggressive,” Reynolds said of pursuing an elimination of state income taxes by next year. “I want to create a foundation that when I do leave, the next Republican governor that sits in that chair will be able to continue to reduce the individual income tax rate.”

“Iowa Press” can be viewed on Iowa PBS at 7:30 p.m. Friday and noon Sunday, and any time online at iowapbs.org.

Comments: (515) 355-1300, erin.murphy@thegazette.com

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