Property Taxes

Strengthening Property Tax Transparency

Direct notification will make local elected officials think twice before increasing property tax rates because they know all citizens will be notified of the increase and its potential impact on their properties.

 

This fall, local governments across Iowa will begin the process of creating their budgets. Local government, whether county, city, or school boards, depend heavily on property taxes for funding. These budgets are being created after many Iowans received notices this summer from their respective assessor announcing increased property assessments. Often many people believe the assessor is the cause of property tax increases, but the actual responsibility lies with local governments. Local governments establish spending levels through the budget process, and citizens need to be informed and involved if they want to see lower property tax bills.

 

During the last legislative session, the legislature passed, and Governor Kim Reynolds signed a property tax accountability and transparency measure. This new law requires county and city (school districts were not included) governments to hold a public hearing if the proposed budget increases more than two percent above the previous year, and a supermajority vote for the increase to be enacted. This new two percent “soft cap” is meant to control the growth of property taxes and require local governments to provide more transparency within the local budget process. The goal of this law is to not only require more accountability and transparency within local government spending but also prevent local governments from claiming windfalls from increased assessments. If assessments increase by 10 percent, it does not mean local governments should automatically receive a 10 percent budget increase.

 

Iowa’s property tax accountability and transparency law is based on some of the principles contained in Utah’s Truth-in-Taxation law, which is considered the most taxpayer-friendly property tax law. “While Truth-in-Taxation does not technically limit property taxes, it makes local elected officials think twice about increasing property tax rates because they know all citizens will be notified of the increase and its potential impact on their property,” stated former Utah state Senator Howard Stephenson. Utah’s Truth in Taxation law requires an extensive public notification and hearing process if a local government wants to increase taxes. Through the Truth-in-Taxation process, local government must justify why they want to increase taxes for additional spending.

 

Requiring a direct notification will only strengthen and empower transparency and accountability within Iowa’s local governments.

 

Iowa’s property tax law requires public notification and a hearing for local governments to surpass the 2 percent “soft cap,” but requiring direct public notification is a needed reform. Requiring a direct notification will only strengthen and empower transparency and accountability within Iowa’s local governments. A direct public notification will also provide more clarity for citizens to be involved. Iowa could design a notification that is similar to Utah’s:

 

This fall, it is imperative Iowans participate in their local government budget process and remember that higher property tax bills do not originate with the assessor, but rather with the spending decisions being made by local governments.

 

The new property tax accountability and transparency law provides more opportunity for Iowans to be involved in their county and city budget process. Nevertheless, requiring a direct notification of a property tax increase will make it easier for the taxpayer to see why they need to act.

 
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