When I was door knocking this past election I heard people say that they thought our property tax system was unfair and confusing to understand.  The truth is few people understand our present system and I believe we have a proposal that answers that concern and simplifies the revenue side.

I have been part of a House Republican team assigned to reform Iowa’s tax code.  On Thursday, April 03, 2003 we unveiled the first phase of our Iowa Tax Reinvention Project. The first phase outlines a plan to completely overhaul Iowa’s property tax system.  The group is comprised of Rep. Jamie Van Fossen, Rep. Kraig Paulsen, Rep. Kent Kramer, Rep. Jim Kurtenbach and myself.

Rep. Van Fossen, Chair of the House Ways and Means Committee, laid out a goal to modernize and simplify the tax system.  This is an exciting new proposal, and as far as we are aware, the only one of it’s kind.  We have worked extremely hard, and our consensus is that we’ve got a winning solution.”

The governors challenge to the legislature to sunset and replace the system, gave us an opportunity to step up to the plate and deliver to all Iowans’ a desire for economic growth and change.  The principles are guided by encouraging economic growth, establishing equity, and offering simplicity and more local control.”

Residential property taxation will be based on an assessed value divided by the square footage of the structure.  For example, a $100,000 assessed value home that has 2,000 square feet for the assessed value has a square foot tax valuation of $50 per square foot.  A $200,000 assessed value home that has 2,000 square feet for the assessed value has a square foot tax valuation of $100 per square foot. 

The system that we have in place punishes you for making improvements on your home, making it a nicer place.  We create accountability between citizens and their local governments.  It is time for a tax system that actually enhances economic development, not one that stifles it.

County governments would be able to multiply the state or local government tax rate.  Therefore, if a county government were to have a tax rate of one cent per square foot, the owner of the $100,000 home would pay the county $50 per square foot times 2,000 square feet times one cent per square foot of valuation equals $1,000.

Property taxes could only be raised by adding square footage to your residence, or if the local government increased its own tax rate.

Every Iowan will be able to figure out their own property taxes, which they cannot do today.  If your taxes are to be raised, you will know immediately by how much you will be affected.  Iowans deserve to know what is in their tax code.  This formula is fair and offers incentives for improvement, whereas the current system does not.

Commercial property will be taxed in the same fashion as residential property.  The classification of “industrial” will be removed.  Further, commercial property will also be valued in terms of an Iowa CPI valuation inflation index.

Agricultural property tax currently has some of the biggest disparities.  According to the Iowa Department of Revenue and Finance, the amount of actual tax payments made by Iowa farmers varies from approximately $8.50 per acre in the southern counties to approximately $27.50 in northern counties.  A proposed alternative for agriculture taxation is to lock the countywide average in place at the end of 2003 on a county-by-county basis.  The average would be based upon an average of the previous five years of tax collections from agriculture and applied uniformly to every acre within the county.

Equity needs to be established for our rural residents, the fluctuations have been unbearable for some.  We will alleviate this problem under our plan by establishing equity tied to the size of the land, not the size of the yield.  As a result, we will have fewer fluctuations in property tax revenue.

There would be five classifications of property: residential, commercial industrial, agricultural structures, green space/environmental preference and government and non-profits.

This plan gives us a good base on the revenue side of property tax, but it does not address the other concern I heard that property taxes are to high.  But with this framework we can stop blaming who is raising property taxes and start concentrating on what we are trying to pay for with the collection of property taxes.

Please continue to think of our President and the troops serving our country.

Until next week,

Tom Sands