Suscribe to Weekly RiverCitiesReader.com Updates
* indicates required

View previous campaigns.

Iowa Politics Roundup: House Approves Nearly $1 Billion in Property-Tax Relief PDF Print E-mail
Commentary/Politics - Iowa Politics
Written by Lynn Campbell   
Thursday, 12 May 2011 09:51

The Iowa House on Tuesday night voted 58-40 along party lines for a sweeping property-tax-relief plan that could cost as much as $1 billion, despite repeated warnings from Democrats that the bill would give tax breaks to businesses while increasing taxes for Iowa homeowners and farmers.

“Do you really believe we should raise taxes on our parents, our children, our farmers in order to give a 40-percent tax cut to Wal-Mart?” asked state Representative Jerry Kearns, D-Keokuk, who also is a staff representative for the United Steelworkers Union. “I don’t believe so.”

Senate File 522, as approved by the House, includes a rollback on commercial and industrial property taxes from 100 percent to 60 percent of valuation over five years. To make up the lost revenue, the state eventually would provide $250 million a year to local governments. The bill limits residential and agricultural property-tax increases to 2 percent, rather than the current 4 percent. It also increases state aid to schools at a cost of up to $555 million by Fiscal Year 2019.

Representative Brian Quirk (D-New Hampton) joined Republicans in voting for the bill. Representative Kim Pearson (R-Pleasant Hill) joined Democrats in voting against it. Two Republican lawmakers – Dan Huseman of Aurelia and Ralph Watts of Adel – were absent.

“Property taxes have been studied to death, and it’s now time for action,” said state House Ways & Means Chair Thomas Sands (R-Wapello), the bill’s floor manager. “If we do absolutely nothing, we will see the biggest property-tax increase the state has ever seen. Doing nothing is not an option.”

State Representative Greg Forristall (R-Macedonia), a farmer, said this legislation will be “the biggest job-creating bill of this session.”

The estimated cost of the House property-tax plan ranges from about $800 million to nearly $1 billion, depending on how much school districts are allowed to increase their budgets each year, according to the nonpartisan Legislative Services Agency. It gives extra relief to businesses that currently pay taxes on 100 percent of the assessed value of their commercial and industrial properties, as opposed to the 50 percent paid by homeowners and farmers.

“Tax increases are inevitable to homeowners and to farmers,” said state Representative Dave Jacoby (D-Coralville). “The bill is not ready. This bill will cost $1 billion. Smaller government? I think not. Less expenditures? I think not.”

State Representative Roger Thomas (D-Elkader), executive director of the Elkader Development Corporation, said the plan is too bold.

“I have several concerns about the aggressiveness of the proposed bill,” Thomas said. “This bill will definitely shift the burden of property taxes to residential.”

State House Minority Leader Kevin McCarthy (D-Des Moines) angrily shouted on the House floor that the House Republican plan for property-tax relief would lead to a large increase in state spending.

“Almost a billion dollars annually is going to have to come out of the state general fund,” McCarthy said.

Attempts by House Democrats to approve a more modest plan for property-tax relief and ensure local governments are protected from losses in tax revenue failed Tuesday on party-line votes.

Jacoby proposed that cities be prohibited from reducing funding for law enforcement, fire protection, emergency medical services, and local emergency management, despite the loss of tax revenue. His amendment failed on a 43-53 vote.

Another amendment proposed by Thomas would have taken the bill back to the more modest, $200-million plan for a commercial-property-tax credit approved by the Democrat-led Senate. His amendment failed on a 40-58 vote.

Under the Senate plan, the state would create a property-tax credit for businesses at a cost to the state of $50 million in Fiscal Year 2013. The cost would grow incrementally to $200 million over four years, if state revenue increased by at least 4 percent in each of those years. Businesses would see about $600 in property-tax relief by taking the first $30,000 in assessed value and taxing it at residential rates.

“It will begin the process of relieving the commercial property tax, but it won’t impact cities and counties and schools,” Thomas said.

Sands praised the Senate bill as showing that state senators are serious about doing some kind of commercial-property-tax relief, and are attempting to address some of the inequity that businesses face. But Sands noted that money for the state Senate plan depends on state revenue growing by 4 percent each year.

“It actually adds another layer of complexity to the already complex property-tax system,” Sands said. “The fact is it’s so modest; does it really do anything to spark jobs across this state? That is something we all campaigned on vigorously in the last election.”

Sands acknowledged that the $250 million a year that the state intends to give to local governments to make up for some of the $600 million a year of losses in tax revenue isn’t certain.

“There is no such thing as a total padlock to tie up dollars or intent,” he said.

But Sands said lawmakers do not intend to harm local governments.

After passage of the property-tax bill and a mental-health reform bill, members of the Iowa House went home for the week. Key players were told to be on-call in case leaders reach an agreement on the state budget and tax policy as they continue to work towards adjournment of the 2011 legislative session.