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Iowa Republicans unveil revamped property tax overhaul proposal
New plan doubles proposed homestead exemption to $50K
Apr. 9, 2025 7:38 pm, Updated: Apr. 10, 2025 7:23 am
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DES MOINES — Key lawmakers Wednesday rolled out a revamped version of their proposal to overhaul Iowa’s property tax system that incorporates feedback gathered from local governments, business groups and others.
Rep. Bobby Kaufmann, R-Wilton, and Sen. Dan Dawson, R-Council Bluffs, who chair the House and Senate Ways and Means committees, filed an updated version of their property tax overhaul proposed several weeks ago.
Republicans have proposed eliminating the state's property tax rollback system, which limits property tax increases, enacting a 2 percent cap on most revenue growth and shifting about $400 million in funding for K-12 schools from local property taxes to the state.
Republicans’ original proposal would have:
- Used state general fund dollars to provide about $400 million in school funding currently paid for with local property taxes;
- Capped most property tax levy growth to 2 percent each year, excluding revenue for new construction
- Provided each household a $25,000 homestead property tax exemption;
- Raised an existing property tax exemption for Iowa veterans to $7,000 from $4,000;
- Provided a property tax credit to Iowans 70 years old and older who make less than 350 percent of the federal poverty level;
- Phased out the state's "rollback" system for residential, commercial and industrial properties by 2030. The rollback rate, calculated each year, limits the amount of property taxes Iowans pay to a percentage of what their property is assessed.
Senate Study Bill 1227 and House Study Bill 328 makes several changes from the original proposal, including:
- Increasing the homestead property tax exemption to $50,000;
- More quickly removing the “rollback” for all property classifications except agriculture, effective for the budget year beginning July 1, 2026;
- Adding a “budget adjustment factor” tied to the Consumer Price Index alongside the 2 percent revenue restriction to help local governments manage times of elevated inflation. The new version would let local governments exceed the 2 percent limit — allowing most property tax levy rates to increase up to 5 percent — during times of high inflation, as determined by increases in the consumer price index;
- Providing a minimum “budget guarantee” in the event of a recession, population loss or natural disaster;
- Creating an interim study committee “to examine appropriate rates of property taxation imposed by governmental entities following the adjustments to assessment limitations and levy rate limitations made” under the bill.
Other provisions from the previous proposal, including property tax exemptions and credits for veterans and seniors and shifting school funding from local property taxes to the state, remain in the new bill.
“With assessment letters coming out, Iowans have been louder than ever with their concerns about property taxes,” Kaufmann said in a statement. “Iowans have expressed their concern, rage, and fear about unpredictable increases and their ability to afford staying in their homes. We are working to provide real relief to Iowans and their families, make Iowa a competitive state to live, and deliver a property tax overhaul that focuses on property taxpayers.”
Dawson pointed to a study published by Common Sense Institute, which found statewide property tax revenues tracked inflation from 1978 through 1999. From 2000 to 2024, however, property taxes grew at more than twice the rate of inflation — 170 percent versus 73 percent, the study reported.
“These updated proposals continue our goal of rebuilding the property tax system to bring relief, and bring more predictability and transparency to taxpayers, local governments and businesses,” Dawson said in a statement.
Statehouse Republicans have said rising property tax costs were a top concern brought up by voters while they campaigned ahead of the November 2024 general election, given sharp increases in property assessments in recent years.
And while they aim to move on property taxes this session, GOP leaders have said the legislation remains a work in progress.
Senate President Amy Sinclair, R-Allerton, told reporters last week she would “like to see it get done this year, but we want it done right, rather than fast.”
House Speaker Pat Grassley, R-New Hartford, said the intention was never to rush the bill; rather, the lawmakers want to ensure it is thoroughly considered. While some parts of the bill may need further refinement as the session continues, Grassley said the goal remains to find a solution. If not everything can be completed this session, discussions can continue next year, but efforts will persist to improve the existing system, he said.
In a March report, the Tax Foundation calculated the total statewide property tax burden amounted to more than $5,600 per household in 2024, lower than Nebraska but higher than other surrounding states, with a mean effective property tax rate of 1.4 percent compared with a national average of just less than 1 percent.
The Tax Foundation, though, points out that because of Iowa’s relatively low property values, higher rates result in lower-than-average annual property tax liabilities for homeowners. The median homeowner in Iowa pays $2,825 on a home, slightly lower than the national average of $3,073.
Kaufmann, speaking to reporters Wednesday, said the bill will undergo further changes based on feedback and fiscal analysis.
“We will then hold the same series of meetings and feedback and inputs … that we had in the original bill, and changes to that we deem necessary based on feedback will be reflected in an amendment that you can expect to see when this bill comes up in committee” in the few weeks, he said.
Comments: (319) 398-8499; tom.barton@thegazette.com
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