By John Hendrickson & Laura Ebke
Reducing the property burden is a priority for most Iowans. Cities and counties across Iowa are in the process of planning their budgets and holding public hearings. Government spending is at the heart of high property tax rates, and these budget hearings will not just establish what the city or county intends to spend, but also determine your future property tax bill. If property taxes are a concern it is imperative that taxpayers become an active participant in the local government budget process.
During the last legislative session, the legislature passed, and Governor Kim Reynolds signed a property tax accountability and transparency measure. This new law requires county and city (school districts were not included) governments to hold a public hearing if the proposed budget increases more than two percent above the previous year, and a supermajority vote for the increase to be enacted. This new two percent “soft cap” is meant to control the growth of property taxes and require local governments to provide more transparency within the local budget process.
The goal of this law is to not only require more accountability and transparency within local government spending but also prevent local governments from claiming windfalls from increased assessments. If assessments increase by 10 percent, it does not mean local governments should automatically receive a 10 percent budget increase.
Iowa’s property tax accountability and transparency law is based on some of the principles contained in Utah’s Truth-in-Taxation law, which is considered the most taxpayer-friendly property tax law. “While Truth-in-Taxation does not technically limit property taxes, it makes local elected officials think twice about increasing property tax rates because they know all citizens will be notified of the increase and its potential impact on their property,” stated former Utah state Senator Howard Stephenson. Utah’s law is not only controlling the growth of property taxes, but it is also a property tax reform example for other states.
At the heart of Utah’s Truth-in-Taxation law requires an extensive public notification and hearing process if a local government wants to increase taxes. Through the Truth-in-Taxation process, local governments must justify why they want to increase taxes for additional spending. A crucial aspect of Utah’s law is a direct notification requirement, which is sent to taxpayers and provides information on the proposed tax increase such as the date, time, location, and potential cost of the tax increase. This extensive public notification and hearing process is successful and taxpayers in Utah actively participate in Truth-in-Taxation hearings.
Requiring a direct public notification that is sent to taxpayers is a needed reform that would help improve Iowa’s property tax accountability and transparency law. Iowa could design a notification that is similar to Utah’s. This would empower taxpayers by providing additional clarity on what can be a complicated budget process.
As local government budget hearings progress it is imperative for taxpayers to participate by asking questions about spending, property tax rates, and whether higher assessments will result in a windfall of more revenue and higher property tax bills.
Residents and businesses across Iowa are demanding property tax relief and the best path to provide it is to focus on local government spending. Iowa’s property tax transparency and accountability law is designed to control the growth of property taxes, but unless spending is controlled, any property tax relief will be limited. Requiring a direct notification will only strengthen and empower transparency and accountability within Iowa’s local governments.
John Hendrickson is Policy Director of Tax Education Foundation of Iowa, a public policy think tank based in West Des Moines, Iowa and Laura Ebke, Ph.D., is a Senior Fellow at the Platte Institute, a public policy think tank based in Omaha, Nebraska.