Honesty helps lower property taxes

Editor’s Note: John Hendrickson is the Iowans Policy Director for the Tax Relief Foundation, and Dave Trabert is the Managing Director of the Kansas Policy Institute and author of “What Was Really the Matter with the Kansas Tax Plan”. Center Square, a nonprofit dedicated to journalism, provided the commentary to News-Press.

Increasingly, Iowa residents are frustrated with high property taxes. A majority of Iowans, 63.4%, believe that property taxes are too high.

The concern about property taxes goes beyond the rural-urban divide and the identification of political parties. Taxpayers often wonder why they never see property tax relief or why their inquiries about high taxation go unanswered. Policymakers have the opportunity to finally tackle high property taxes and provide tax breaks by implementing a truth in taxation law.

Utah and Kansas serve as the gold standard for taxpayer-friendly tax truth laws. Kansas, which passed its law in 2021, is already seeing astonishing results.

Instead of collecting big increases from assessment changes, local officials must vote and take responsibility for the entire tax increase they impose. Each year, the thousandth rate is reduced so that new assessments bring the same amount of property tax revenue to local governments. If they want more, they must notify taxpayers of their intention by mail, hold a hearing for public comment. Then they have to vote for the entire tax increase they impose.

More than half of all cities, counties, townships, school districts, and special tax districts in Kansas have decided not to raise property taxes this year. Now that they have to be honest about the tax increases, officials from over 1,900 local government entities suddenly decided they could deliver services a little more efficiently. It is the power of honesty and transparency.

There are no exceptions or loopholes in Kansas law. Local officials must officially vote for a property tax increase if they wish.

Iowa taxpayers would save hundreds of millions of dollars over time, just like Utah taxpayers.

According to the Lincoln Institute of Land Policy, the owner of a commercial property in Des Moines valued at $ 1 million pays about $ 41,000 in property taxes; that same property in Salt Lake City pays only $ 14,000. The owner of a $ 150,000 house in countryside Hampton pays over $ 2,800, but that same house in countryside Utah pays just over $ 1,000.

Too often, local governments claim a windfall from increased assessments, and the taxpayer wonders why their tax bill is higher. When asked, local government officials argue that they are not to blame for not raising property tax rates. Too often, the blame is passed on to assessors and the real culprit for raising property taxes is spending by local governments. Truth in Taxation corrects the “honesty gap” and forces local governments to justify why they have to raise taxes for higher spending.

Before the passage of Truth-in-Taxation, Kansas had a property tax “cover,” which aimed to control spending and tax increases, but too many budget lines were exempt, which made it without consequence. The new law now prohibits indirect increases in assessment and allows no exceptions or loopholes. It even includes new growth.

In 2019, Iowa passed a property tax transparency and accountability measure, which has sadly been dubbed a tax truth law. This law was a good reform, but in its most charitable form it could be seen as a weak version of fiscal truth. The law only slightly improved transparency, while creating a low threshold for counties and cities to exceed the soft budget cap of 2%. School districts were also exempt, which is the main driver of property tax bills. The tax truth applies to all local tax authorities in Kansas and Utah.

For too long, property taxpayers have been ignored. It’s time to restore honesty to the property tax process.

Local officials will oppose many objections to tax truth, but they are surely at least as capable as officials in Kansas, and they can make it work if they want to.

Ask them this: Why shouldn’t you be honest about the 100% property tax increase you impose?

John Hendrickson and Dave Trabert

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