Iowa succeeded in its income tax reform because it balanced prudent budgeting with growth-friendly tax rate reductions. In addition to common-sense conservative budgeting, Gov. Kim Reynolds has also been proactive in reforming state government and making it more efficient. Limiting spending and reforming government has been a successful formula for Iowa’s historic income tax reforms. This is the same approach that can be used to combat rising property taxes. Property tax reform can be accomplished through two specific ideas that will provide real and lasting relief: limiting local government spending and improving the current truth-in-tax process.

Property taxes have increased over the past two decades in Iowa, increasing by more than 110 percent. This growth has far outpaced population growth and inflation, placing a heavy burden on taxpayers, especially those on fixed incomes. The main driver of this increase is not just rising real estate values, but also uncontrolled spending by local governments. As local governments increasingly rely on property taxes to fund their operations, the gap between revenue growth and taxpayers’ ability to pay has widened.

In 2023, the Iowa Legislature passed a comprehensive property tax reform measure. The property tax law included several provisions, including consolidating levies, truth in tax or direct reporting, November bond elections only, and adjusting levy rates as valuations rise through a “soft ceiling”.

Although the 2023 law made significant reforms to Iowa’s complex property tax system, it did not address the root cause of the property tax burden, namely local government spending. Expenses, regardless of the type of tax, determine taxation.

Even the “soft cap,” which is ending, does not fully cover expenses. Local governments across Iowa continue to increase their property taxes, which means they increase their spending. From FY 2024 to FY 2025, Iowa counties are croissant their property tax revenues by more than 7 percent, cities by more than 6 percent and school districts by more than 5 percent. That means taxpayers will pay more than $6 billion in property taxes to fund local governments.

One of the reasons the 2023 reform and previous measures have failed to deliver lasting tax relief is that they have not addressed local government spending. Going forward, it will be imperative that the next property tax reform addresses the growth in local government spending. One policy option that would force local governments to reduce spending and provide property tax relief would be to establish a levy cap. Most states have some form of property tax levy limit.

Implementing a hard 2% cap on property tax growth would force local governments to restrain their spending. If Iowa had capped property taxes at 2% this year, it would have done so. recorded to taxpayers 250 million dollars.

The truth-telling process in tax matters, which constitutes a positive step towards greater transparency, must be strengthened. Under the 2023 tax reform, local governments were required to send taxpayers property tax statements containing not only property tax information, but also the date, time and location of the tax bill. local budget hearing.

This direct notification process is crucial to improving transparency in Iowa’s complex property tax system. It is at the local budget hearing that taxpayers have the responsibility to express their concerns regarding property taxes. Additionally, the tax truth process aims to force local officials to publicly vote on the budget.

However, the notices were poorly designed and many taxpayers were left confused and frustrated. To help clarify the notices, taxpayers were directed to the Department of Management website. Additionally, the statements were vague in describing the impact of a potential increase on taxpayers’ property tax bills.

The direct notification process needs to be improved. Iowa can consult other states with truth in tax laws and send similar statements to taxpayers. For example, Utah and Minnesota send taxpayer returns that are transparent and easy to understand. The purpose of these taxpayer disclosures is to ensure that taxpayers know what the impact will be on their tax bill.

Limiting local government spending and strengthening the tax truth process is the best solution to providing property tax relief to all taxpayers.

John Hendrickson is a political director and former state representative. Tom Sands is a senior tax fellow at the Iowans for Tax Relief Foundation.

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