In May, lawmakers in Iowa secured a big win for Iowans on their property tax bills. Going forward, Iowa will operate with “Truth in Taxation” and a revenue based system that is modeled after Utah’s almost 40 year old program.
With the passage of House File 718 on a nearly unanimous bipartisan vote and the signature of Governor Kim Reynolds, Iowa becomes the latest state to see the wisdom of the system Utah has pioneered. Other states that have passed similar legislation in recent years include Tennessee, Kansas and Nebraska. The American Legislative Exchange Council (ALEC) has included model Truth in Taxation language in their 2023 Essential Policy Solutions publication and other states continue to consider it.
Iowa’s Speaker Pro Tem, John Wills, commented on the bill, saying, “Property taxes are often hard to understand by the taxpayer and easy to abuse by the local government. That’s why Iowa implemented Truth-in-Taxation that shines the light on these taxes, so they are more easily understood and harder to abuse.”
Property taxes are the single largest source of revenue for local governments. For most states, property taxes are tied to the assessed value of property. As assessment values increase, property taxes will increase on autopilot. Taxpayers end up paying higher property taxes to get the same quality and quantity of public services as before the property tax increase. Utah’s system is revenue based, where the taxing entities receive the same revenue as the previous year- plus new growth. The tax rate floats down as property values increase, and if the taxing entity wants to increase revenue above the previous year’s revenue, Truth in Taxation is triggered with notices and public hearings.
Iowa chose to implement a system that caps levy rates. If local governments want to exceed the cap, the Truth-in-Taxation notification and hearing process is triggered. Under this process, all citizens will be automatically notified of the property tax increase and its potential impact on their property. Local officials will also have to hold a broadly advertised public hearing and recorded vote, where citizens can communicate their concerns about the proposed tax increase. This makes local officials think twice about voting to increase property taxes.
Since 1985 when the Utah Taxpayers Association was involved in the development of Truth in Taxation, we have defeated repeated attempts to overturn or erode it. That will continue to be a major focus of the association.