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Iowa Republican leaders have competing plans to cut property taxes. How they compare
The question now: how much budget pain can cities and counties absorb in exchange for lower tax bills?
Jan. 26, 2026 5:30 am
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Republican leaders in the Iowa Legislature and Gov. Kim Reynolds have unveiled competing proposals to overhaul the state’s property tax system, setting up challenging negotiations over how aggressively to limit local government revenues and how quickly taxpayers would see relief.
House Republicans released their plan last week, joining earlier proposals from Senate Republicans and the governor. House Democrats have also offered an alternative, though Republicans hold agenda-setting majorities in both chambers and control the governor’s office.
At a broad level, all four plans share the same diagnosis: Iowa’s property taxes are too high, and local governments have been allowed to grow revenue faster than household incomes. Where they differ is how hard to hit the brakes and where to deliver relief — and how hard to clamp down on local government budgets.
The push comes as Iowa continues to rank near the top nationally in property taxes. Iowa has the 11th-highest property tax burden in the country, according to the Tax Foundation, and the 10th-highest effective property tax rate, according to Rocket Mortgage.
Local government leaders have raised concerns that a hard revenue cap could limit their ability to keep up with inflation or respond to rising costs. Property taxes are levied by cities, counties and school districts and are a primary source of funding for services such as police and fire protection, emergency medical response and schools.
The takeaway: House Republicans want predictability and relief now, the governor wants certainty for taxpayers plus restructuring, Senate Republicans want a rebuild, and Democrats want relief without squeezing local governments as hard. The fight now is how much pain lawmakers think cities and counties can absorb in exchange for lower tax bills.
House GOP: Immediate caps, broad exemption
The House Republican plan emphasizes predictability and near-term relief. It would cap local property tax revenue growth at 2 percent plus new construction, ensuring that cities and counties are still incentivized to grow. The cap includes exceptions for schools and the debt levy.
House Study Bill 596 also creates a new $25,000 exemption on every residential property, and makes it harder for local governments to take on debt backed by property taxes.
The exemption would apply after Iowa’s existing rollback calculations and would reduce the taxable value of every home in the state.
House Republicans also propose requiring 60 percent voter approval for property-tax-backed bonds, expanding the role of regional councils of government to identify efficiencies, and revamping property tax statements to make them easier for taxpayers to understand.
Supporters say the plan delivers broad, immediate relief. Critics, including local officials, warn that a hard cap could strain local budgets as costs rise, noting inflation and health insurance premiums have been rising faster than 2 percent for several years.
Governor: Cap plus structural changes
Reynolds’ proposal also includes a 2 percent cap on local revenue growth — with exceptions for debt service and school funding — but layers in a series of changes aimed at reshaping how local government operates.
Her plan, Senate Study Bill 3034, would move property tax assessments from every two years to every three years, arguing that less frequent assessments would protect families from rapid valuation increases and provide more predictability for homeowners. It would also limit the use and duration of tax increment financing (TIF) districts, and freeze property tax bills for homeowners age 65 and older whose homes are valued at $350,000 or less.
Reynolds’ office argues some cities have used TIF too broadly and for too long, shifting the tax burden onto properties outside the districts. Local officials contend the special taxing districts are a valuable way to finance the infrastructure — like roads and sewers — needed to attract new commercial, industrial and housing development.
The governor also proposes creating a $10 million state fund to encourage cities and counties to consolidate positions or share services, and eliminating election mandates for county treasurers, auditors and recorders — allowing those offices to be appointed instead.
Her office estimates the package would save taxpayers more than $3 billion over six years. Reynolds has argued that meaningful property tax relief requires not just tax limits, but changes to how local governments deliver services.
Senate GOP: Slower, systemwide rebuild
Senate Republicans have taken a more gradual and technical approach, pitching a gradual overhaul of Iowa’s property tax system.
Their plan, Senate Study Bill 3001, would phase out Iowa’s decades-old property tax rollback mechanism and replace it with a large homestead exemption — 50 percent of a primary residence’s value, up to $350,000. For homeowners age 60 and older who have paid off their mortgage, the bill would eventually exempt 100 percent of a home’s value from property taxes.
The Senate proposal also calls for the state to assume the full cost of K-12 education, allowing school districts to lower property tax levies, and for indexing gas tax revenues to inflation — allowing funding for the state's roads and bridges to grow more over time.
Under the Senate GOP plan, the state would assume the full cost of basic K-12 education and special education — costs that are currently shared with local property taxpayers. That shift would allow school districts to lower their property tax levies, with the statewide school tax rate projected to fall from $5.40 to $4.49 per $1,000 of taxable value. Supporters say the plan is designed to reduce school property taxes without cutting overall school funding, instead shifting more of the cost to the state budget.
It would also raise the military service property tax exemption from $4,000 to $7,000 by 2028.
Supporters describe the plan as a fundamental rebuild rather than an incremental fix, though its benefits would roll out over time rather than immediately.
Democrats: Higher cap, targeted relief
House Democrats argue that Republican plans risk hollowing out local services.
Their plan would cap property tax growth at 4 percent, triple the homestead tax credit, freeze property taxes for Iowans 65 and older, and provide temporary rebates — $1,000 for homeowners and $500 for renters — before the cap takes effect.
Democrats say the higher cap would still limit tax growth while giving cities and counties more flexibility to keep up with inflation and rising costs.
State Rep. Dave Jacoby, D-Coralville, added the plan’s 4 percent annual cap on property tax growth would provide both relief for taxpayers and certainty for local governments. Jacoby offered the example of a person who owes $1,000 in property taxes one year. The next year, their bill could not be more than $1,040.
The rebates would be funded through the Iowa Taxpayer Relief Fund, a state account comprised of unspent state general fund revenue, designated to provide relief to Iowans, according to Jacoby.
What comes next
Cost estimates for the competing plans were still being calculated.
Republican leaders say negotiations among the House, Senate and governor are ongoing, with expectations that the proposals will be merged into a single package later this session.
Speaking Friday during a taping of “Iowa Press” on Iowa PBS, Senate Majority Leader Mike Klimesh, R-Spillville, defended the Senate GOP’s property-tax proposal as a long-term overhaul rather than incremental relief, saying lawmakers are trying to rebuild what he called a “40-year-old system” that has been patched with short-term fixes.
Klimesh said the Senate plan is aimed at helping seniors on fixed incomes who are struggling to stay in their homes as tax bills climb. “Property taxes are strangling Iowa taxpayers right now,” Klimesh said, adding that he regularly hears from seniors facing affordability pressures.
While acknowledging concerns from cities and counties about potential revenue losses, particularly in smaller communities with older housing stock, Klimesh said other provisions in the Senate bill are designed to offset those impacts, including limits on levy growth tied to inflation and expanded flexibility for local-option sales taxes with voter approval.
Klimesh also rejected the idea of property-tax rebates included in House Democrats’ proposal, characterizing them as another temporary fix. “I look at rebates like another band aid,” he said, arguing instead for a comprehensive restructuring that provides tax relief without “artificially constrain[ing] small communities or counties from being able to provide services.”
Negotiations among Senate Republicans, House Republicans and Reynolds’ office are already underway, Klimesh said, with stakeholder input expected to shape the final legislation.
The push comes after lawmakers failed to reach an agreement on property tax reform last year and as Iowa continues to rank near the top nationally for property tax burden.
The core question, as the debate moves forward, is how much budget pressure local governments can absorb — and how much certainty lawmakers are willing to trade for speed and scale of tax relief.
Erin Murphy and Maya Marchel Hoff of The Gazette-Lee Des Moines Bureau contributed to this report.
Comments: (319) 398-8499; tom.barton@thegazette.com
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