After passing the largest income tax cut in state history last year, Iowa Republicans are looking for even more opportunities to lessen the tax burden on businesses and individuals.
Although it’s a target-rich environment for Republicans, who control the governor’s office and both chambers of the Iowa Legislature, it’s not clear which taxes they will vote to cut or by how much in the legislative sessions that starts Jan. 14. While they aren’t sharing details of the plans, legislative leaders say they heard a lot of concern about property taxes when they were on the campaign trail last summer and fall.
“Here’s what we hear at the door: ‘How is it that I read in the newspaper that my tax rate is going down yet I open my bill and it has gone up?’” House Speaker Linda Upmeyer, R-Clear Lake, said.
She sees a need for more “truth-in-taxation, some transparency in the process” so homeowners know how their property taxes are being used.
“If local government has a need to raise taxes they should make clear to Iowans why and what for,” Upmeyer said.
GOP leaders seem less likely to look again at state income taxes after enacting a cut of $2.86 billion when phased in over six years.
“I don’t think there is a huge amount of interest in doing a whole lot more in that arena at this moment,” the speaker said. “We’ve heard from people they want this fixed or that fixed. Some of those things were intentional. So whether they get fixed or not, I don’t know. I don’t anticipate big changes.”
Senate President Charles Schneider, R-West Des Moines, and Senate Majority Leader Jack Whitver, R-Ankeny, are on the same page.
“A lot of what we want to do this year is fix any kind of minor issues that have presented themselves to us,” Schneider told a Des Moines Partnership legislative priorities luncheon in December.
Democrats, according to House Minority Leader Todd Prichard, D-Charles City, “are going to be for making the tax system fair.” But it’s too soon to be talking about sweeping changes.
“We don’t even really know what the impact of tax reform passed in 2018 will be,” Prichard said.
While tax collections over the last six months have been increasing, Republican leaders are tapping the brakes on suggestions they should accelerate the phase-in triggers in the 2018 tax package that must be met so Iowans could feel tax relief sooner.
“We want to make sure that it’s working the way we want, that our budget is sound and then maybe next year start taking a look at that to see if we want to accelerate that if we need to make changes to that or further reduce taxes,” Whitver said. “Accelerating the triggers is for the future.”
Upmeyer believes the triggers were “fairly aggressive” and any action to accelerate them will depend on the economy.
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“If ag economy doesn’t pick up, I think (accelerating triggers) will be a stretch,” she said.
Like Upmeyer, Whitver believes there’s work that can be done this year on property taxes. His concern is that regardless of what local government officials say they are doing to hold the line or lower property taxes, “they continue to go up.”
Considering that a home typically is a taxpayer’s most valuable asset, rising property values usually is seen as a good thing, said Lucas Beenken of the Iowa Association of Counties.
The association understands that some property owners — seniors on fixed incomes, for example — might face challenges as home values and property tax bills go up, Beenken said, “But the thing to remember is that supervisors set one tax rate that is applied to all properties.”
“If legislators want to target some of those issues, it would be a state issue. Targeted tax credits to address those situations should be paid for by the state” rather than by the counties, he said.
Statewide, Beenken added, property taxes account for about half a county’s revenue, so any change by legislators to decrease that would affect services to residents.
Beenken also pointed out that property owners have the ability to influence local government spending.
“The budget process is done in public. The budget proposals all are public records. There’s a public hearing. The whole thing is very transparent,” he said.
“I’m not against assessments going up,” Whitver said. “The question is, what is a reasonable rate of taxes to pay on your house?”
Senate Republicans aren’t ready to roll out a property tax plan, but Whitver told Ways and Means Committee Chairman Randy Feenstra, R-Hull, “to look at property taxes holistically to see where we can make it better for the taxpayer.”
The talk of more tax changes has Senate Minority Leader Janet Petersen, D-Des Moines, bracing for the worst.
Democrats did not put up any votes for the tax package Republicans passed in the final days of the 2018 session and Petersen doesn’t think that’s likely to change this year.
“You know, they certainly campaigned on putting more money in Iowans’ pocketbooks. That hasn’t kicked in yet,” Petersen told Des Moines Partnership members at their luncheon. “If you are an average Iowa income earner it would take 15 weeks for the tax cut to pay for your lunch.”
Yet the 2018 tax changes could mean a reduction in state revenue of $400 million this year, according to Rep. John Forbes, D-Urbandale.
“My concern is being able to fund the vital programs like education, our state Medicaid program and things like that,” he said.
Any talk of further tax cuts at this point only shows Petersen that Republicans’ “priorities are in the wrong spot.”