Taxes the talk of legislative coffee

MURRAY – Snowy roads Friday didn’t deter constituents from attending a legislative coffee town hall hosted by Sen. Amy Sinclair, R-Allerton, and Rep. Ray “Bubba” Sorensen, R-Greenfield, at the Murray Community Center; Rep. Sam Wengryn, R-Pleasanton, was unable to attend.

“We do appreciate being able to engage and have conversation largely because... I would say, 95% of the bills that I’ve ever introduced, outside of the ones that I had to do because I was a committee chair, have come directly from constituents,” Sinclair said. “So this does matter. This is where we hear what needs to happen, where we hear how Iowa’s code is impacting your lives.”

With Friday marking the end of the first of two funnel weeks - a deadline set by the legislature to help keep bills moving along - questions and concerns about property tax reform took up most of the hour.

Proposed tax reform

Currently, there are three bills proposed to address property tax reform - Gov. Kim Reynolds’ Senate Study Bill 33034/House Study Bill 563, Senate Study Bill 3001 and House Study Bill 596.

Clarke County Supervisor Dean Robins expressed concern about a proposed piece of legislation in the house bill that would abate the first $50,000 of residential properties.

“You take that first $50,000 out… you’re asking us to get our levy down, which we’re working on, which is a challenge, but if we bring those levies down,” Robins said. “Let’s say that we are below 3.5, that’s just going to put more pressure on the next $50,000 versus that first $50,000. So what have we gained?”

He asked if sales tax would be looked at to offset that proposed change, noting inflation issues since 2020.

Sorensen pointed to confusion in how property taxes work, with the people who complain the loudest voting for levies that raise their taxes. He said his familiar comparison of surgery with a sledgehammer v. scalpel.

“We do surgery with a sledgehammer at the state and it affects all counties and all counties are different,” he said. “You guys at the county level can do surgery with the scalpel.”

He said he didn’t think people asking for lower property taxes in turn has an effect on essential services.

“They don’t get that correlation. They don’t know where every dollar’s going for. They know their property tax bills going up and they get it in the mail and then they’re mad,” Sorensen said.

Sinclair said the Senate version of a comprehensive overhaul of property taxes and a piece that made her “nervous” was the setup of a mechanism to index gas tax.

“Both of those are very regressive taxes,” Sinclair said of gas and sales taxes. “Particularly we’re regressive in rural areas where we all drive more.”

She said she didn’t like the idea of indexing the gas tax without a backstop due to the higher burden it would place on people in rural areas. On sales tax the senate bill would allow local governments another half cent of local option sales tax, Robins said it needed to be set up like SILO (School Infrastructure Local Option) taxes and not like local option sales tax. Sinclair said it would not be, because not all communities would do it.

Sinclair said she disagreed with the two proposals to freeze or eliminate property taxes for older Iowans who are mortgage-free, saying it would hurt small cities and towns the most.

“That means that 10 years, I don’t have to pay property taxes because my home is unencumbered,” Sinclair, who pays $2,600 in property taxes on her five-bedroom, three-bathroom home in Wayne County built in 2002, said. “I don’t think that I need to not pay property taxes.”

Murray City Administrator Denise Arnold questioned the repercussions of reducing property taxes as constituents still expect essential services.

“Our growth, we’ve gone up over 9%. We can only levy 7.99% this year because of that,” Arnold said. “We have two brand new houses going in town, another one going up. I’m expecting six more in the next two years. That just hurts us.”

Osceola City Administrator Ty Wheeler said that attack shouldn’t be a revenue issue, but a valuation issue.

“The valuation issue is what folks feel is an arbitrary increase in their property valuations on an independent parcel basis,” Wheeler said. “But what I’ve experienced multiple years is our entire pie may only grow 2.5%.”

He said the system needed to be simplified, including leaving the rollback alone at 50% on residential properties and that valuation needed to be indexed versus tying value to one-year market performance. Sinclair disagreed, saying the most objective measure of property value is market value.

“I’m not a fan of the rollback, but… that’s what the rollback is designed to convey. It’s calculated so that you don’t have the wild swings on a system,” she said.

Both Sinclair and Sorensen remarked it was difficult to get too into details on proposed bills as the bills currently available are unlikely to be the finished products.

With education, part of the governor’s bill would take money from SAVE (Save on A Valuable Education) to give school property tax relief. By doing so, however, schools would then have to issue general obligation bonds on property taxes to make up for what they have lost in SAVE funds.

“I have real concerns about that plan. Yeah, it’d be great if as the bonds phase out, those dollars are pushed more aggressively into property tax relief - I would be fine with that,” Sinclair said. “But why on Earth are we scooping them to give property tax relief only so the school boards have to issue GO bonds on property taxes? That doesn’t make sense.”

Township trustees

Robins asked about SSB 3009 which seeks to eliminate township trustees and have county supervisors take over their duties. Iowa counties are divided into townships with trustees who oversee areas such as township cemeteries, settle fencing disputes and provide fire and rescue services through contracts with local city fire departments. In Clarke County, there are 12 townships with three trustees and one clerk per township. Under the proposed bill, the supervisor could then appoint people to serve on commissions to handle cemetery and fencing matters.

“At the county level, we don’t need any more responsibility and overhead,” Robins said.

While the bill has passed out of committee, Sinclair said she wasn’t supportive of it and didn’t think it was likely to go anywhere.

“Townships as a whole cost almost zero tax dollars and they do fulfill a vital function,” Sinclair said, speculating the bill was likely created in response to Gov. Reynolds’ DOGE committee report.

Other topics

Other points of discussion touched on included fluoride in the drinking water, a bill introduced last year that would allow eighth graders to participate in high school athletic events, wages for caregivers, mental health resources, hunting tags for out-of-state landowners, school lunches and wind turbines. About wind turbines, Sinclair said it was a local issue, not a state one, but pointed out the possible tax benefits.

“Forty-three percent of Adair County’s local property taxes are paid for by the owners of the wind turbines, which means that half of the property taxes are not being paid by the residents,” she said. “In my opinion, that’s a local decision for local folks to determine whether or not they want the wind turbines or higher taxes.

No additional legislative forum dates in Clarke County have been set as of yet.

Proposed bill snapshots

Local government property

tax revenue limit

• The governor and house bills would limit city and county tax collections to a 2% growth from the previous year for all taxing authorities, minus debt services and school funding. New construction and growth would not be included in the current fiscal year limit.

• The senate bill would limit growth to between 2% and 5% based on inflation.

Homestead exemption and rollback

• The governor’s bill would change the current credit to a homestead exemption with no intended taxpayer impact.

• The senate bill would eliminate Iowa’s taxable valuation rollback and replace it with a flat 50% taxable value discount for homestead properties.

• The house bill would have residential properties receive a $25,000 taxable value exemption that doesn’t apply to tax imposed by a school district. There would be no rollback change.

Schools

• The governor proposed phasing in use of SAVE (Secure an Advanced Vision for Education) currently at 1% for school district property tax relief.

The senate bill has many proposals, including reducing the school foundation levy, eliminating supplement levy while increasing state share and restricting a district’s ability to impose a management levy if cash reserves are too high.

Senior citizens

• The governor proposed freezing property taxes for seniors aged 65+ with homes valued at $350,000 or less.

• The senate bill would eliminate most all property taxes for seniors aged 60+ who have paid off their mortgage.

Gas and sales taxes

• The senate bill would see gas tax indexed to increase with inflation and allow current 1% local option sales tax to increase to 1.5%.

Assessments

• The governor’s bill would see property tax assessment occur every three years instead of two, with burden of proof placed on the assessor in valuation appeals.

• The senate bill would have no structures other than dwellings on ag land be included in assessment.

Side-by-side comparisons of the bills can be found at taxrelief.org.