Property tax bills might increase from valuation growth more than the promised reduction from increasing the sales tax.
Many property owners in Polk County received a shock recently as they opened their new property tax assessments. Assessments in Polk County increased from 7.1 percent in Johnston to 11.6 percent in Des Moines. Numerous property owners saw a 10 percent increase in their property values. The increase in property assessments had been predicted, but it still does not cushion the shock or the concern about having to pay higher property tax bills.
The reason for the increase in property assessments is a strong housing market, which has led to increased property values. This is good news for anyone selling a home or property, but it is worrisome for those who fear that it may result in a property tax increase, or otherwise don’t have more cash on-hand to pay those bigger tax bills.
In March, voters in several Polk County communities passed a 1 cent local sales tax increase and part of the argument in favor of the tax increase was that it would be used to lower property taxes. The sales tax increase will officially begin on July 1, 2019, but any property tax relief, if any, will not occur until 2020 or 2021. Some cities, such as Des Moines, recently lowered their property tax rate by 60 cents. It should be noted that not all the sales tax revenue will be targeted towards property tax relief. Altoona has signaled that the new sales tax increase will “partially alleviate a property tax increase” in 2020, but it will not prevent further tax increases.
Property owners are rightly worried. In fact, a property owner interviewed by KCCI news is concerned that the increased assessments will translate into higher property taxes. “We paid the one (cent) sales tax to reduce property tax, but yet our property valuations have gone up, what, 20 percent? 10 percent? which will wipe out any of those tax savings.”
This is a valid concern and taxpayers must not only be vigilant but be ready to hold local governments accountable to make sure that some of the sales tax increase will be used to lower property taxes. Polk County Assessor Randy Ripperger argued that “assessments are not the problem for property taxes; it’s the city’s revenue demand.” “If people are truly unhappy about revenue increases, they need to participate in their city’s budget process,” stated Ripperger.
Ripperger is correct that the assessment is not the problem, but rather local government spending. He is also correct that residents need to take more ownership in how local governments spend their tax dollars. Whether it is property taxes at the local level or income taxes at the state level, sound tax reform must start with slowing the growth of government spending. Justifying an increase of one tax in exchange for lowering another is not ideal tax policy.