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Op-Ed: Honesty leads to lower property taxes
[The Center Square] John Hendrickson
and Dave Trabert
Iowans are growing more
frustrated with high property taxes. A majority of Iowans, 63.4%,
believe that property taxes are too high. The concern over property
taxes surpasses the rural-urban divide and political party
identification. Taxpayers are often left wondering why they never see
property tax relief or why their inquiries about high taxation go
unanswered. Policymakers have an opportunity to finally address high
property taxes and deliver tax relief by implementing a
Truth-in-Taxation law. |
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 Utah and Kansas serve as the gold standard for taxpayer
friendly Truth-in-Taxation laws. Kansas, which passed their law in 2021, is
already seeing amazing results.
Instead of collecting big increases from valuation changes,
local officials must vote on and take responsibility for the entire tax increase
they impose. Each year, the mill rate is reduced so that the new valuations
deliver the same dollar amount of property tax revenue to local governments. If
they want more, they must notify taxpayers of their intent in a mailing, hold a
hearing to get public feedback, and then they must vote for the entire tax
increase they impose.
More than half of all cities, counties, townships, school districts, and special
tax districts in Kansas decided to not increase property tax this year. Now that
they must be honest about tax increases, officials presiding over 1,900 local
government entities suddenly decided they could provide services a little more
efficiently. That’s the power of honesty and transparency.
There are no exceptions and no loopholes in the Kansas law. Local officials must
go on record voting for a property tax increase if they want one.
Iowa taxpayers would save hundreds of millions of dollars over time, just like
taxpayers in Utah.
According to the Lincoln Institute of Land Policy, the owner of a commercial
property in Des Moines valued at $1 million pays about $41,000 in property tax;
that same property in Salt Lake City only pays $14,000. The owner of a $150,000
home in rural Hampton pays over $2,800 but that same home in rural Utah pays a
little over $1,000.
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Too often, local governments claim a windfall from
increased assessments, and the taxpayer is left wondering why their
tax bill is higher. When questioned, local government officials
argue that they are not to blame because they have not increased
property tax rates. Too often blame is shifted to assessors and the
true culprit in driving high property taxes is local government
spending. Truth-in-Taxation corrects the “honesty gap” and forces
local governments to justify why they need to increase taxes for
higher spending. Prior to the passage of
Truth-in-Taxation, Kansas had a property tax “lid,” which was
intended to control spending and tax increases, but too many budget
lines were exempt, which made it inconsequential. Now, the new law
prohibits backdoor increases from valuation and does not allow any
exceptions or loopholes. This even includes new growth.
In 2019, Iowa passed a property tax transparency and accountability
measure, which was unfortunately referred to as a Truth-in-Taxation
law. This law was a good reform, but in the most charitable form it
could be considered a weak version of Truth-in-Taxation. The law
only slightly improved transparency, while creating a low threshold
for counties and cities to surpass the 2% soft budget cap. School
districts were also exempt, which are the leading driver of property
tax bills. Truth-in-Taxation applies to all local taxing authorities
in Kansas and Utah.
For too long, property taxpayers have been ignored. It is time to
restore honesty to the property tax process. Local officials will
offer up a lot of objections to Truth in Taxation, but they are
surely at least as capable as officials in Kansas, and they can make
this work if they want. Ask them this: why shouldn’t you have to be
honest about the entire property tax increase you impose?
John Hendrickson serves as policy director for Iowans for Tax Relief
Foundation and Dave Trabert is the chief executive officer of the
Kansas Policy Institute and author of "What was Really the Matter
with the Kansas Tax Plan." |
