DES MOINES – The Iowa House approved what supporters said called a $1.2 billion property tax relief plan that its detractors warned would cost income tax payer more than $1 billion over time.
On a 59-40 party line vote, representative sent House File 2274 to the Senate where it joins three other House-passed property tax relief plans as well as a $200 million Senate plan.
Majority Republicans called their bill necessary to avoid a $2.5 billion increase in property taxes over the next decade and to create certainty and stability for businesses that want to locate or expand in Iowa and create more jobs.
“Now is the time for real and substantial property tax reform and relief,” Speaker Kraig Paulsen, R-Hiawatha, in a rare floor speech by a presiding officer of the House. Noting that Iowa has some of the highest commercial and residential property taxes in the nation, he said, “Now is the time for action.”
The plan provides homeowners with $417 million in property tax relief, roll back taxes on commercial property from 100 percent of assessed valuation to 60 percent over eight years and provides about $1 billion in “backfill” or payments to cities and counties to make up for some of the commercial property tax money they’d lose as a result of the rollback.
In a nod to Senate Democrats desire to provide small business property tax relief, the House plans accelerates tax relief to businesses with assessed valuations of $400,000 or less from eight years to five years.
However, Rep. Dave Jacoby, D-Coralville, warned the GOP plan will cost nearly $1 billion over eight years. That cost would be shifted from commercial property tax payers to Iowa income tax payers, which he called an “abuse of income tax payers.”
There’s also the $492 million of increasing the state’s share of the school foundation cost from 87.5 percent to 100 percent, Jacoby said.
“There is no doubt the House Republican plan will raise property taxes on homeowners by $357 million,” Jacoby said in a statement issued after the debate. “We should reduce property taxes for Iowa businesses, but homeowners should not be forced to make up the difference. We need a responsible property tax plan that will help Iowa grow and create jobs without punishing homeowners.”
But floor manager House Ways and Means Chairman Tom Sands, R-Wapello, said picking up the school funding is dollar-for-dollar property tax relief for all classes of property owners – commercial, residential and agricultural.
Jacoby offered to substitute the Senate plan for HS 2274. It would provide relief via a direct commercial property tax credit to Iowa-based small businesses. Originally, the plan called for $200 million in relief, but Gronstal said his caucus is willing to add another $50 million.
Republicans, who hold a 60-40 majority, rejected the amendment.
The ball is now in the Senate’s court, Paulsen said after the debate.
“I’m under no illusion the Senate is just going to send it down to the governor,” he said. “We have made an honest effort to be sensitive to their concerns. We’ve modified our proposal towards that end. My hope is they will pick it up and give us a suggestion back.”
He’s optimistic that the chambers can reach an agreement. For the first time he can recall, the House, Senate and governor are all serious about property tax relief.
“That’s the first time that’s happened since I’ve been here,” Paulsen said. “So I think there is a political opportunity that has presented itself that we don’t want to miss.”
There could be a political cost if legislators don’t succeed, but the real cost will fall on property tax payers, Paulsen said.
“The burden continues to grow, the level of interest and needs of Iowans to address it continues to grow,” he said. “I have clearly sensed it ratcheting up over the course of the last decade.”