This week, ITR sat down with Jared Walczak, Senior Policy Analyst for the Tax Foundation, to discuss what Iowa can do to control property taxes.
Everyone who has looked at their skyrocketing property tax bill in Iowa probably has the same emotion: anger. Walczak said this frustration is rooted in the fact that an increase in the value of property does not change the owner’s ability to pay the tax. As one of our members has written to us, “Just because my house is worth more doesn’t mean I have more dollars in my pocket to pay taxes.”
Some states limit the growth on assessments or valuations. Walzack said this can distort property tax bills even within neighborhoods, with seemingly identical properties having drastically different property tax bills. Artificially capping assessments also creates disincentives for homeowners. Since states with assessment caps typically only revalue properties after a sale, change of use, or substantial improvement, homeowners simply are not willing to move or improve homes in fear of triggering a jump in their tax bill. Unfortunately, this only shifts the tax burden to someone else.
As assessments or valuations rise, property tax increases are on autopilot. We asked Walczak how Iowa can control property tax bills. He recommends a budget or revenue limit; “At a local level, total growth of collections from property taxes can only rise by a certain amount in a given year. It can be a set amount like two percent, or it can be an inflation measure. If local government wants to go beyond it, they can go to the voters and ask for an override.”