Democrats and Republicans seem to agree that Iowa’s commercial property tax is archaic and out of line with other states, but hope is fading that the Legislature will approve a fix this year because of stark differences about how best to do it.
The primary dilemma legislators have encountered for the last 35 years is how to loosen taxes on businesses without sticking the bill to other classes of property or forcing local governments to absorb the shortfall.
Iowa farmland is taxed according to a complex formula based on production, not land value. Homes are taxed on a reduced value that’s roughly half the assessed value of the home. Businesses, however, are assessed and then taxed at that full value.
House Republicans, backed by GOP Gov. Terry Branstad, have approved a plan to reduce commercial property taxes by taxing property at 60 percent of assessed value rather than the current 100 percent. The state would offset the lower tax revenue to local governments by up to $250 million a year. Republicans would also increase state funding for schools to further relieve property taxes.
Democrats, who hold a narrow Senate majority, would tax the first portion of a business’ value, in some proposals at about $100,000. After that, it would revert to the standard business tax.
Democrats say their plan targets Iowa businesses and doesn’t give a break to big out-of-state companies. Republicans say that only broad tax cuts will spark the economy.
With the session schedule to end on April 17, legislators and lobbyists seem to have moved on to other issues.
“I’ve had one conversation with (Senate Majority Leader Mike) Gronstal in the last couple of weeks regarding property taxes,” said House Speaker Kraig Paulsen, R-Hiawatha.
Rep. Tom Sands, R-Wapello, who heads the tax-writing Ways and Means Committee, acknowledges his efforts at finding an imminent compromise are looking grim.
“I’m writing my newsletter right now and not only is it looking like spring outside, but I feel like legislators in here are in this let’s wrap up, do what we need to do and get out of here mode,” Sands said.
Gronstal said time is wasting and it’s time for all sides to seek a middle ground.
“Nobody has a magic solution,” he said. “I feel we’re having pretty good significant discussions, and that’s where we’re at.”
Joe Bolkcom, D-Iowa City, who heads the Senate’s tax panel, led the bargaining when lawmakers fought about the issue last year, only to fall short of a solution. He is seeing little progress this year.
“I don’t know whether we’re any closer or farther away,” Bolkcom. “It’s kind of status quo.”
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