What will Iowa lawmakers do this year to lower property taxes?

• Iowa lawmakers are debating a major property tax reform ahead of adjournment
• The latest version of the bill includes feedback from local governments and business groups
• Rising property taxes remain a top concern for voters
• But large, unanswered questions remain as to what the impact will be for homeowners, cities, counties, schools and others
• Lawmakers have yet to provide a fiscal analysis to show how the changes will balance out

DES MOINES — One of the largest unanswered questions facing Iowa lawmakers as they eye adjournment in the next few weeks, is what — if anything — will they do to lower property taxes.

Key lawmakers last week rolled out a revamped version of their proposal to overhaul Iowa’s property tax system that incorporates feedback from local governments, business groups and others.

The revamped proposal includes a $50,000 property tax exemption for every Iowa household — up from $25,000 in the original bill. It also would eliminate the state's "rollback" for residential and commercial properties starting with the budget year beginning July 1, 2026 — rather than phasing it out over five years.

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Republicans have proposed eliminating the state's property tax rollback system, enacting a 2 percent cap on most revenue growth and shifting about $426 million in funding for K-12 schools from local property taxes to the state.

The rollback rate, calculated each year, limits the amount of property taxes Iowans pay to a percentage of what their property is assessed.

Instead of that, Iowa would use a “revenue-restricted system.” The bill would cap annual property tax growth for cities and counties to 2 percent, excluding revenue from new construction or in times of high inflation.

The existing rollback keeps statewide growth in check, but permits large swings in individual counties. The new system would allow taxable property value to grow by a larger margin in the state. However, there would be new limits for property tax growth.

Eliminating the rollback would make the property tax system fairer and easier to understand, while phasing in revenue growth restrictions to prevent rising tax bills, said Rep. Bobby Kaufmann, R-Wilton, and Sen. Dan Dawson, R-Council Bluffs, who chair the House and Senate tax policy Ways and Means committees.

“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.”

Critics of GOP proposal want clarity about bills’ effects

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But large, unanswered questions remain as to whether the proposal will actually lower property taxes, and what the financial impacts will be for cities, counties, school districts and other local taxing entities.

Numerous groups were registered undecided on the bills. The only group registered in favor, as of Friday morning, was the American Legion of Iowa.

Disabled veterans would see the entire value of their homes exempted from property taxes under the bills. And all military veterans would be eligible for a $7,000 exemption, up from $4,000 under current law.

Iowans 65 years old and older would be eligible for a $6,500 homestead exemption that exists in current law, on top of the $50,000 exemption proposed in the bill. It would also provided a property tax credit to Iowans 70 years and older who make less than 350 percent of the federal poverty level.

Common Good Iowa — an Iowa-based nonprofit research and advocacy organization focused on the well-being of children, families and workers — was the only group registered against the proposal.

Mike Owen, deputy director of Common Good Iowa, said the lack of a fiscal analysis to show how the changes will balance out has left Iowans in the dark — and prevents stakeholders from understanding the full impact of the bill.

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“It's utterly irresponsible of our state legislators to talk about these big tax plans without identifying what services can be cut if we have a reduction of revenue,” he said.

Kaufmann said generating revenue and property tax impact estimates has been tricky, given the complexity of the proposed changes and limitations of state data systems.

“Of course I want to know what the impacts are on residential homes. Of course I want to know what a side-by-side looks like. ... That’s why we’re going so slow,” he told The Gazette. “This is a brand-new system. This a brand-new revamp of a 40-plus-year-old system. It takes time to get those answers, which is why we’re going so slow and why we’re being so judicious.”

House Minority Leader Jennifer Konfrst, D-Windsor Heights, told reporters last week House Democrats were still reviewing the latest proposal, which is a 76-page bill.

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“If we want to be honest with Iowans about whether or not property tax reform will lower their property taxes, draw the line for me,” Konfrst said. “Make it clear that this legislation will do this and would be a relief for a lot of Iowans. We've just not seen it. We've been seeing property tax reform for years, and we continue to see rates go up. I don't know anyone whose property taxes have gone down, and we've been hearing that they're fixing property taxes for a decade.”

House Democrats want to give a $1,000 property tax rebate to Iowa homeowners, a $500 rebate to renters and freeze property taxes for seniors, paid for using Iowa’s $3.75 billion Taxpayer Relief Fund.

Proposal would cap tax increases, with contingencies for inflation

Local government officials voiced concerns about the original GOP proposal's potential impact on city, county and school budgets and services during a pair of subcommittee meetings last month.

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The new proposal, Senate Study Bill 1227 and House Study Bill 328, would provide mechanisms for cities and counties to raise additional tax revenue in the case of high inflation or if property values drop.

The legislation would either cap property growth at a 2 percent increase over the previous year's property tax revenues, or it would guarantee a 0.5 percent increase, whichever is greater.

Kaufmann said the 0.5 percent option is intended to ensure property tax revenues don't drop in case of unforeseen circumstances, like a recession, natural disaster or population loss in a community.

In cases when inflation is higher than 4 percent, the bills create a sliding scale, allowing property taxes to grow beyond 2 percent.

House Democrats, some city officials and Common Good Iowa argue the GOP proposal primarily benefits commercial and industrial property taxpayers, with a push for residential taxpayers to shoulder a greater share of property tax bills.

Owen, with Common Good Iowa, also highlighted the risk of moving school funding from property taxes to the state general fund, which is projected to decline — making the new funding model uncertain.

“So it's not a reliable source of revenue for schools looking at the longer-term picture,” Owen said. “So moving from the property tax to the state funding is a pretty risky venture for schools. Well, those are some big issues that have to be resolved in any property tax bill, and we're not going to resolve it in the next three weeks.”

Owen questioned the need to cut property taxes, calling it a “false assumption that somehow Iowa is out of line with other states.”

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.

A March report from the Tax Foundation calculated the total statewide property tax burden amounted to more than $5,600 per household in 2024, ranking the state 10th 10th highest in the nation for property taxes paid as a percentage of owner-occupied housing value.

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 bill for homeowners. The median homeowner in Iowa pays $2,825 on a home, slightly lower than the national average of $3,073.

Lawmakers ‘willing to wait’ to get a bill passed

The outstanding questions and the complexity involved of trying to change the state’s convoluted property tax system — with just weeks left in the session — has prompted many to question what — if anything — lawmakers will do on the topic this year.

House Speaker Pat Grassley, R-New Hartford, said the intention was never to rush the bill. While some parts of the bill may need further refinement, Grassley said the goal remains to find a solution. If not everything can be completed this session, discussions can continue next year, he said.

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“My expectation is we're still working toward finding some level of certainty for Iowans when it comes to property tax,” he told reporters. “As we've said this entire session, trying to reboot a system that's been in place as long as it has isn’t just a simple task. My expectation is we would really like to still find something that we can leave session with, regardless of what that vehicle is or avenue.”

Kaufmann said he and Dawson will continue hold meetings with stakeholders on the new proposal, and anticipates amending the bill again to incorporate further feedback.

“When this bill becomes ready for prime time, most certainly it will be one of the last things we do,” he said. “We’re not rushing anything. I want all those questions … answered, and however long it takes to get those answers is however long I’m willing to wait to do it, because this is a major bill.”

Comments: (319) 398-8499; tom.barton@thegazette.com