What is a Property Tax Revenue Cap?
A revenue cap is a limit on how much total property taxes collected by local government can grow each year. ITR proposes a limit of 2 percent or the rate of inflation, whichever is less.
If a local government wants to exceed the cap, local elected officials must justify to their citizens why spending more tax dollars is necessary and cast an affirmative vote on that tax increase after a public hearing process. This would preserve local control and encourage cost savings.
What About Property Tax Assessments?
When considering property tax reform, a popular target is the assessment process and assessors. While, the assessment should be as fair and accurate as possible, focusing only on the assessment misses the root of the problem- how much money local governments are spending!
Solely addressing assessments creates inequalities, distorts the valuation of property, and creates tax shifting and other unintended consequences. Limits on assessments do not necessarily limit the growth of local government.
Why Not Freeze My Property Tax Bill?
A common response to property tax reform is to freeze, exempt, or eliminate property taxes for various classes of people. This is basically having the government pick winners and losers among property taxpayers. Any solution to unaffordable property taxes must benefit everyone. While the desire to do so is understandable, targeted freezes or exemptions merely shift the burden to other taxpayers.
National Organizations Support ITR
This week, two national taxpayer organizations joined ITR in support of a property tax revenue cap.
Americans for Tax Reform President Grover Norquist co-wrote an op-ed with ITR President Chris Ingstad. In the article they stated,
“Lawmakers in Iowa should also do everything in their power to keep local tax bills in check, as high local taxes are also a deterrent to businesses and investment. One way to accomplish this is to implement local spending limits that require spending growth to be no more than population growth and inflation.”
National Taxpayers Union President Pete Sepp joined Ingstad in sending letters to Iowa House and Senate leadership encouraging them to enact a property tax revenue limit. The letters offer suggestions of how to tackle high property taxes including:
- Supporting a cap on future property tax revenue growth.
- Setting a supermajority. Most successful property tax limits impose a high “override” requirement on the local governing body.
- Increasing public input and transparency.
- Ensuring assessed values reflect market values.
- Implementing an extensive public hearing process should also be strongly considered as part of the property tax solution.
Taxpayers Are Speaking Up
Put a cap on property tax revenue
Prioritize legislation ‘before the residential property taxes are out of control’
Tell your property tax story! Use the button below to easily send a letter to the editor. Start with one of our templates or write your own. Our action center will send to your local papers based on your address.
Inheritance Tax Repeal Advances
The Senate passed SF 1 out of subcommittee on Thursday on a 2-1 vote. This bill would eliminate the inheritance tax. The inheritance tax in Iowa can require up to 15% tax on asset transfer if the recipient of a given asset is not a lineal relation of the benefactor.
This can create problems for small businesses and family farms. Often, farmers and small business owners are asset-rich but cash poor. If a deceased person does not have children or chooses to leave their assets to a non-lineal relation, this can create a scenario where the beneficiary does not have the liquid assets to pay the inheritance tax. This could potentially result in the sale of a small business or family farm. This is not the outcome tax policy should strive to achieve, and ITR applauds Sen. Feenstra and Sen. Chapman’s votes to move SF 1 forward and eliminate the death tax.
Property Tax Reform Bill Introduced
Wednesday, the House Ways and Means Committee introduced a property tax reform bill, HSB 165. It appears the bill:
- Establishes a budget limitation for cities and counties.
- Contains an override mechanism for local officials to exceed the established limit. If they choose to do so, citizens would have the right to call for a reverse referendum if they disagree with local elected officials’ actions.
- Encourages, but does not require, some budget reforms for cities and counties.
We will continue to examine the bill and will have a more detailed analysis in next week’s Watchdog email newsletter.
State Spending Limit
“How can we make the state stop spending so much money?” This is a common question we hear across Iowa. There are many solutions but one of the broadest is to add a spending limit to the state constitution.
If a constitutional amendment limiting how much government could spend had been in place, Iowa’s General Fund spending since FY 2012 would have been $488 million less by FY 2017.
The amendment fell
1.5% or just 6,386 votes short
of being ratified by Iowa voters.
Iowa was close to adding a spending amendment 20 years ago. After passing in both the House and Senate in two successive General Assemblies, an amendment was narrowly defeated in June 1999. The amendment fell 1.5% (49.25% for, 50.75% against) or just 6,386 votes short of being ratified by Iowa voters. The measure received majority vote approval in 66 of Iowa’s 99 counties.
Last week, SJR 2, a bill that would limit the annual increase in spending to the lesser of 99% of estimated revenue, or 4% above the previous year’s revenue was passed out of a Senate subcommittee.
This is a common sense solution that is long overdue.
Stopping Medicaid Abuse
When fraud occurs in any public assistance program it not only hurts those who truly need the services, but it fleeces the taxpayers.
Medicaid is the second largest budget driver for Iowa. In fact, nearly 1 out of 5 Iowans receive Medicaid benefits. It is important that regular audits are conducted to ensure benefits are applied only to those who truly need the services and ensure taxpayer dollars are not being abused. Other states that have implemented Medicaid recipient audits found considerable fraud. Louisiana, for example, randomly checked 100 Medicaid recipients and discovered that 82 of them no longer qualified for benefits.
This week, SSB 1131, a bill providing additional oversight of Medicaid and other public assistance programs, passed out of a Senate subcommittee.
Last week, we wrote about unnecessary burdens placed on lower-income workers from job licences. It is great to see others are weighing in on the subject, too. A guest column in the Des Moines Register written by two researchers from the Center for Growth and Opportunity estimates 48,000 jobs and $290 million are lost because of barriers created by occupational licensing in Iowa.
In this video clip, we asked Laura Ebke, Senior Fellow for Job Licensing with the Platte Institute, how licensing creates hurdles for entry into some occupations because of increased time and expense.
While some oversight and licensing will always be necessary, the fact that Iowa licenses more workers per capita than any other state should be of great concern. While ITR does not suggest eliminating all occupational licensing, we do encourage the legislature to create a system to review all existing licenses to determine if licensure is still needed, and if so, if the requirements are still appropriate (and competitive with other states) for the occupation.