Property tax reform tops legislative list

House, Senate, governor agree change is needed, but their proposals differ

Property tax reform, which Iowa lawmakers failed to achieve earlier this year, will be a top priority in the legislative session that begins next month, House and Senate leaders told a group of business people Tuesday.

The Republican House, the Democratic Senate and Gov. Terry Branstad’s administration all agree that relief must be provided to commercial property owners, House Speaker Kraig Paulsen and Senate Majority Leader Mike Gronstal told a crowd over lunch at the Iowa Taxpayers Association’s annual meeting in West Des Moines.

“From an institutional level, this is the first time … that you have the House, the Senate and the governor’s office all interested in addressing the issue at the same time,” Paulsen, R-Hiawatha, said. “That’s never happened before.”

All the reform efforts focus primarily on commercial property, which is currently taxed on 100 percent of its assessed valuation — a rate substantially higher than that of residential and agricultural property in Iowa and higher than commercial rates in nearby states.

Still, the proposals developed by the House and Senate diverge substantially in how the tax cut would be structured and paid for.

House Republicans want to reduce the percentage of valuation on which all commercial and industrial properties are taxed, and to limit the increases in tax rates that local governments — including school districts — can pursue in a given year, said House Ways and Means Committee Chairman Thomas Sands, R-Wapello.

The cost to local governments of such reductions and limitations to their tax base would be offset by revenue growth that will occur for other reasons — but not through state assistance, he said.

The Democratic proposal, meanwhile, would cut taxes for all commercial properties but offer bigger reductions for smaller and, ostensibly, locally based businesses, said Senate Ways and Means Committee Chairman Joe Bolkcom.

“We love Wal-Mart, we love Menards and we love Best Buy, but simply sending tens of millions of dollars to their out-of-state headquarters doesn’t do much for the schools, doesn’t do much to maintain our roads and the local services we all depend on,” Bolkcom, D-Iowa City, said. “We make a choice here to focus on small, Main Street businesses.”

The cost to local governments of the reduction would be offset with state funds, which Bolkcom and Gronstal, D-Council Bluffs, argue are available.

During the last session, Branstad, a Republican, pushed lawmakers to drop the level at which commercial property is taxed to 60 percent of assessed valuation over five years, at a cost of $200 million per year.

Branstad spokesman Tim Albrecht said Tuesday the governor is meeting with state and local officials on the issue, but has not yet developed a proposal for the coming session. Nonetheless, it’s a top concern.

“This will be, along with education reform, the single top priority for the governor this upcoming legislative session,” Albrecht said. “Any property tax reform will have to reduce property taxes on Iowa’s job creators, and it must be a permanent solution.”

In addition to education reforms, legislative leaders said they would focus on economic development proposals and increased scrutiny on tax increment financing, a technique used by cities to develop or redevelop certain districts. Increased tax revenues in a district are used to pay for public improvements such as streets and sewers.